The ink is barely dry on President Donald Trump’s sweeping new tax law. But a debate is already underway over a gambling provision that could reshape how millions of U.S. gamblers are taxed on their bets.
That’s because the so-called "One Big Beautiful Bill" (OBBB), signed into law on July 4, 2025, introduces a cap on deductions for gambling lossses.
Starting January 1, 2026, gamblers will be able to deduct only 90% of their gambling losses against their winnings on federal taxes. (That’s a shift from the previous policy that allowed a full 100% deduction of gambling losses, against/but not to exceed winnings.)
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The Joint Committee on Taxation (JCT) has projected that the measure will raise roughly $1.1 billion over ten years.
Already, some lawmakers are unhappy and pushing to repeal the provision. Curious? Here’s more of what you need to know.
Trump gambling losses tax deduction: What’s changing?
President Trump’s new tax bill was enacted on Independence Day (July 4, 2025). The mega legislation, which preserves many of Trump’s tax cuts from 2017 (the Tax Cuts and Jobs Act (TCJA), introduces a new limit on a popular deduction for gambling losses.
- If Congress doesn't repeal the provision, beginning in 2026, taxpayers will only be able to deduct 90% of their gambling losses against their winnings on their federal income tax returns.
- Under the traditional system (still in place for the 2025 tax year, with returns typically filed in early 2026), an itemizing taxpayer who wins and loses the same amount in a year, with proper documentation, can generally deduct 100% of their losses, not to exceed their winnings.
So, for example, if someone gambling wins $210,000 and loses $210,000 in a year, they could deduct the full $210,000 in losses. Under the new law, beginning in 2026, only $189,000 of that amount would be deductible. That could result in a taxable income from those bets of $21,000, even though the gambler broke even.
Note: As written, the OBBB deduction change would likely apply to both casual and professional gamblers.
'Phantom income' problems in new Trump tax bill?
Historically, the IRS has required all gambling winnings to be reported as taxable income, regardless of whether they are from casinos, sports betting, lotteries, or fantasy sports.
Taxpayers who itemized deductions could fully offset winnings with losses, but only up to the amount of their winnings. So, taxes were paid only on net profits.
The new 90% cap, some argue, would disrupt that. According to some opponents of the measure, the new limit could result in gamblers paying taxes on income they didn’t receive.
A key complaint is that if a taxpayer won and lost $100,000 in a year, for example, the new rule would mean that the bettor would be taxed on $10,000 of what some consider to be “phantom income,” since they effectively broke even.
What is Phantom Income? Phantom income refers to money that is taxable to an individual or entity in the eyes of the IRS, even though that person or entity hasn’t actually received the cash.
In other words, it's the notion that you may owe taxes on income that only exists "on paper," not in your bank account.
Enter the FAIR BET Act.
In response to the outcry, Rep. Dina Titus (D-Nev.), along with Rep. Ro Khanna (D-Calif.), introduced the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET) Act just days after the OBBB was signed.
The bill proposes to restore the previous standard, allowing taxpayers to deduct 100% of their gambling losses. Supporters of the FAIR BET Act argue that the new cap unfairly penalizes recreational and professional gamblers.
In an official release, Titus states that the FAIR BET Act would “bring fairness back to gaming taxation, making sure that gamblers can fully deduct losses when they report their winnings.”
It's worth noting that after the OBBB was signed into law with the 90% limitation, Democratic Sen. Catherine Cortez Masto of Nevada introduced a bill called the Full House Act (“Facilitating Unbiased Loss Limitations to Help Our Unique Service Economy”) to restore the ability of gamblers to deduct 100% of their losses.
But on July 10, 2025, Senate Republicans blocked the repeal attempt when Sen. Todd Young (R-Ind.) objected to the unanimous consent request. So for now, the repeal effort is stalled.
In response, Cortez Masto said in a release: “This is a Republican piece of legislation that is actually causing people to pay taxes on money they lost. It makes no sense.”
When it comes to industry response, CNN reported that the American Gaming Association (AGA) initially supported Trump’s tax megabill, but has reportedly voiced support for restoring the full gambling loss deduction.
Reporting gambling losses on taxes
In any case, all gambling winnings must be included on your tax return, regardless of the amount or whether you receive official documentation from the casino or organizer.
- Losses from gambling may be deducted, but only if you itemize your deductions on Schedule A of Form 1040.
- Gambling losses are deductible only up to the total amount of gambling winnings reported, meaning you cannot deduct more than you won.
- (As mentioned, under the OBBB, the percentage of losses that can be written off is set to change to 90% in 2026.)
To claim the deductions, you should keep thorough and specific records of all wagers, including receipts, statements, tickets, or a personal log that documents each session's details: date, place, type of gambling, and amounts won or lost.
Bottom line: What’s at stake with the Trump gambling tax change
The debate over the gambling loss deduction cap highlights broader questions about how the tax code should treat gambling activity.
Some potential Implications:
Tax Liability Despite Breaking Even: Gamblers could owe federal income tax even if their actual winnings and losses cancel each other out.
Increased Costs for High-Volume Bettors: The larger the volume of gambling activity, the greater the impact of the non-deductible 10% on taxable so-called “phantom income."
Proponents of the FAIR BET Act argue that taxing only net winnings is a matter of fairness. At the same time, critics of the previous system view the cap as a means to increase tax revenue and discourage excessive gambling.
With the new deduction cap scheduled to take effect in 2026, the outcome of this legislative battle will have implications for millions of U.S. bettors. Stay tuned.
Read More
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