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Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Starting with tax years after December 31, 2025, the One Big Beautiful Bill Act limits the federal deduction for wagering losses to 90% of those losses, and the deduction cannot exceed wagering gains for the year. The change can leave some winnings taxable even when a gambler’s gains and losses are equal. It affects taxpayers who claim the deduction—not gambling operators directly—and available estimates do not show that it has already reduced industry revenue or wagering activity.
What changed under the Big Beautiful Bill?
Section 70114 of the One Big Beautiful Bill Act amended Internal Revenue Code section 165(d). For tax years through 2025, wagering losses could generally be deducted up to the amount of wagering gains. Beginning in 2026, the deductible amount is capped at 90% of wagering losses and remains limited to wagering gains for the year. The IRS describes the new limit in Publication 505 and the Internal Revenue Bulletin.
This is a change to the tax treatment of gamblers, not a new tax rate levied on casinos, sportsbooks, or other gambling businesses. Calling it a tax increase for affected taxpayers can be apt; describing an industry-wide economic impact as already established goes beyond the available evidence.
How does the 90% limit work?
For an individual claiming the wagering-loss deduction on Schedule A, IRS Publication 505 summarizes the limit as the lesser of 90% of gambling losses or gambling winnings. The deduction is an itemized deduction, so the change matters specifically to people who itemize and claim wagering losses.
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Example: equal winnings and losses
Suppose an itemizer has $100,000 in wagering winnings and $100,000 in wagering losses in 2026. Ninety percent of the losses is $90,000, so the wagering-loss deduction leaves $10,000 of winnings unoffset. That $10,000 is not a $10,000 tax bill: the tax actually due depends on the taxpayer’s full return and circumstances.
Tax years compared
| Tax year | Wagering-loss deduction limit |
|---|---|
| Through 2025 | Losses deductible up to wagering gains |
| 2026 onward | 90% of wagering losses, limited to wagering gains |
The rule concerns losses and gains for the taxable year; it does not let a taxpayer deduct wagering losses beyond that year’s wagering gains.
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Who is likely to be affected?
The practical distinction is whether a taxpayer itemizes and claims the wagering-loss deduction. Treasury and IRS say most taxpayers who report wagering gains do not itemize, and therefore would be unaffected by this particular deduction change. The agencies estimate that 15% or fewer taxpayers itemize under current law. That does not mean every person who bets will owe tax on a break-even result because of the new limit.
Treasury and IRS estimates provide scale, but they are not counts of gambling-industry customers or forecasts of operator losses:
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errors- 2.3 million taxpayers: estimated to have reported gains from wagering transactions on individual returns in 2022.
- Approximately 670,000 taxpayers: estimated to have reported wagering gains and claimed an itemized deduction for wagering losses in 2022.
- 673,000 taxpayers: projected by Treasury and IRS to take an itemized deduction for wagering losses in 2026.
The 2022 figures describe reported returns; the 2026 figure is a projection, not a count of people already affected.
Does the change mean the gambling industry will be harmed?
The IRS regulatory analysis says the change reduces the expected after-tax return for taxpayers who itemize wagering losses. That establishes a taxpayer-level effect, but the official estimates do not measure resulting changes in casino or sportsbook revenue, wagering volume, or employment.
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Before the bill’s final passage, professional poker player Phil Galfond warned: “This new amendment to the One Big Beautiful Bill Act would end professional gambling in the U.S. and hurt casual gamblers, too.” That is a warning about a possible effect, not evidence that professional gambling has ended or that industry-wide harm has been measured.
Accordingly, “ruinous” is an editorial characterization rather than a demonstrated sector-wide outcome. The specific tax change is real; its eventual effect, if any, on gambling businesses and activity is not established by the cited official estimates.
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What should gamblers do for 2026?
Taxpayers whose gambling activity or filing situation is complex may want to organize records of wagering wins and losses and consult a tax preparer familiar with gambling income. A logbook can be a practical organizational aid, but no particular format or product is required or identified by the IRS as approved. Use IRS taxpayer guidance, including Publication 505, for filing rules.
A separate 2026 reporting and withholding change
Publication 505 also describes a higher threshold beginning in 2026 for information reporting and backup withholding. In the cases it covers—including certain winnings of at least $2,000 from bingo or slot machines, keno, and certain other gambling winnings—a 24% flat withholding rate applies. This reporting and withholding rule is separate from the 90% loss-deduction limit: the amount withheld or reported does not itself determine a taxpayer’s ultimate income-tax calculation.
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