On July 4 last year, President Trump signed the One Big Beautiful Bill Act of 2025. However, the real change kicked in on January 1. New restrictions on the amount gamblers can deduct for their losses are now in place for the 2026 tax year. This changes the way you manage victories from NBA evenings or NFL weekends.
The government aims to gather 1.1 billion USD over the coming decade. Politicians fought back. They rolled out the Fair Bet Act to put an end to this blow to your bankroll. We’ll go over how these laws affect what you might earn.
IRC Section 61 Treats Betting Winnings as Regular Income
As stated in Section 61, your taxable income includes “all income from whatever source derived.” This federal rule makes sure that winning a huge jackpot at a slot machine or scoring big in a high-stakes poker game is taxed like your everyday paycheck. The government is looking to get a share of the total sum. Players frequently confuse net profit with the earnings that can truly be reported. That’s a risk that might end up costing you. The guidelines say you need to include all your winning bets on Form 1040, Schedule 1. You can’t just brush off the expenses when you submit your report. Even a swift win in a crash game like Aviator can lift your overall score.
How to Report Your Winnings and Deductions
To ensure your reporting is spot on, you need to focus carefully on the details found in federal forms. Gross winnings from poker or slots are reported directly on Form 1040, Schedule 1. This amount instantly boosts your total taxable income. Taking away those gains requires a different approach. Just don’t go and grab them. Claim your losses separately on Schedule A to break down your deductions and lighten your load.
Have these documents ready for the IRS:
- Put your total gross winnings on Line 8z of Form 1040 Schedule 1 as “Other income”;
- Record allowable losses on Line 16 of Form 1040 Schedule A under “Other itemized deductions”;
- Use Form W-2G to confirm any significant wins noted by the gaming venue;
- Keep detailed session records that include dates, locations, and amounts to support your activity.
Current Limitations on Claiming Losses (Pre-2026)
Taxpayers face tough hurdles when trying to reduce their tax load with gaming losses.
You can’t offset a net loss with other income sources. If someone wins $5,000 but then loses $8,000 at the tables, they’ll only have a maximum deduction of $5,000. The vacant area doesn’t offer any comfort. Putting things in a list creates yet another financial hurdle. You might want to pass on the standard deduction if you’re planning to submit these claims. This standard deduction will be $15,750 for those filing as single in 2025. A lot of casual players often miss this detail since their personal deductions usually don’t reach that figure. Consider these important challenges before you go ahead and submit:
- Limit your claims to just the exact amount of your reported winnings;
- Skip the standard deduction and list your expenses using Schedule A.
W-2G Reporting Guidelines and Triggers
Big winnings will automatically require you to get Form W-2G. Gaming spots need to submit this document whenever a player reaches certain cash milestones. Most casual gamblers hardly come across this kind of paperwork. High thresholds help to control the noise level. For instance, if you want to make a sports bet, you should aim for a payout of at least 600 USD and look for odds of 300 to 1 or higher. Not having this document doesn’t mean you’re free from your responsibilities. The law requires that you willingly inform them of all your income. Verify the exact thresholds that lead a casino to report your winnings:
| Game Type | Trigger Amount |
|---|---|
| Slot Machines | 1,200 USD |
| Keno | 1,500 USD |
| Poker Tournaments | 5,000 USD |
| Sports Betting | 600 USD (plus 300x odds) |
The 2026 Update: The 90% Loss Deduction Cap
Passed in 2025, the One Big Beautiful Bill Act is set to really change things for the 2026 tax year. A third issue is holding back how much you can deduct. Filers can only write off 90% of their gambling losses against their winnings. The old buffer that used to sit at 100% is no longer there. This gap leads to taxable “phantom income” from money that you actually lost. Estimates from the Joint Committee on Taxation suggest that this change could generate roughly 1.1 billion USD in additional revenue.
Crunching the Numbers: Effects on Casual Bettors
A bit of straightforward math reveals the potential impact of the 2026 update. Imagine you score $5,000 but send back $3,000 to the house. The IRS used to tax just the net profit. Now, the agency overlooks a few of those losses, which bumps up the taxable amount. You end up tossing away more money than you actually lost. This hidden income pushes up the tax rate on what you really earn.
Take a look at the details for someone earning a lot:
| Metric | 2025 Guidelines | 2026 Guidelines |
|---|---|---|
| Gross Winnings | 5,000 USD | 5,000 USD |
| Permitted Deduction | 3,000 USD (100%) | 2,700 USD (90%) |
| Taxable Income | 2,000 USD | 2,300 USD |
| Tax Bill Change | 0 USD | +111 USD (37% rate) |
The “Death Blow” for High-Volume Workers
More dangers are coming for those who hustle to earn their keep. Thin margins with fast turnover fall apart with the new calculations. Imagine someone managing 20 million dollars in funds, while also facing losses of 18 million dollars. The real profit amounts to 2 million dollars. However, the revised cap prevents 1.8 million USD from being taken out. The IRS charges a tax on a sum of 3.8 million dollars. This inflation is really squeezing profits, making what should be a stable job feel like a financial trap.
Take a moment to notice the big financial shift:
- Total volume hits 20,000,000 USD, up from 18,000,000 USD spent;
- Previously, the old rules only taxed the 2,000,000 USD net profit;
- Now, the new limits push taxable income up to 3,800,000 USD due to losses that can’t be counted;
- Take-home pay plummets from over 1.2 million USD to around 594,000 USD.
Pushback and Attempts to Repeal the Legislation
There was quite a reaction right after the bill passed in major gaming areas like Nevada.
Representative Dina Titus slammed the proposal, calling it a “phantom tax” on money that players never really got. Her main point is about the surprising results that come from increasing competition in the legal market. Too much risk drives gamblers to keep their heads down. Illegal offshore places don’t need to pay taxes, but they actually provide no protection for consumers whatsoever. This potential shift could really stir things in the regulated sector.
The Full House Act and Restoration Proposals
There are quite a few bills being considered in Congress at the moment, all trying to eliminate the “90 percent” clause in the tax code. Lawmakers are looking to change it back to “100 percent” before the new rules take effect in 2026. Interestingly, this effort isn’t divided by party lines. Republicans and Democrats teamed up on the fresh approach to safeguard the service economy. Review the steps put in place to protect your deduction:
- Rep. Dina Titus put forward the Fair Bet Act (HR 4304) to quickly bring back the complete deduction limit;
- Reps. Miller and Horsford introduced the Full House Act (HR 6985) and gained solid support from both parties to lift the cap.
Challenges in Congress and Predictions for the Market
Lately, the Fair Bet Act has hit significant pushback from the House Rules Committee, leading to some delays. Senator James Lankford from Oklahoma continues to be a tough figure in the Senate. He’s still holding out hope for the possible tax income. External observers are beginning to explore prediction markets such as Kalshi to find the actual odds. Traders grab shares by considering the chances of a shift in direction. In January 2026, hope ran high, yet the path to new legislation is still challenging.
The Risks of Inaction: Black Markets vs. Revenue
Sticking too closely to strict guidelines can sometimes lead to unexpected problems. Players find themselves in a tough spot: they can either play it safe or gamble on the black market to dodge the fallout. This major exit could actually drain the legal income source. While the government is expecting an increase of 1.1 billion USD, the reality could actually be a significant decline in revenue. Pushing up the hidden volume throws off the balanced setup. Consider the serious consequences of this policy:
- Gamblers will flock to unregulated offshore sites that avoid IRS reporting;
- People might conceal their true income to escape the unfair tax on their losses;
- Business at legal sportsbooks will plummet as professionals pull out their funds.
