Among several changes to the tax code introduced by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, gambling (or wager) losses took a hit. Starting January 1, 2026, deductible gambling losses are limited to 90% of your losses and may not exceed your gambling winnings.
Previous rule
If you’re familiar with the guidelines regarding gambling income, you know the IRS doesn’t allow you to simply reduce your gambling winnings by your gambling losses and report the difference on your tax return. Instead, you must report the full amount of your winnings as income and claim your losses separately as a deduction.
Prior to the OBBBA and continuing through the 2025 tax year, 100% of gambling losses could be deducted up to the amount of gambling winnings received during the same tax year. Consequently, if your losses exceeded your winnings, you could offset all your gambling winnings, resulting in $0 taxable gambling income.
New rule as of 2026
According to Internal Revenue Bulletin 2026-19, the OBBBA now reduces your deduction to 90% of your gambling losses and then further limits the allowable deduction to the amount of your gambling winnings. In effect, this means the deduction is generally limited to the lesser of 90% of your total losses or 100% of your total winnings. The following sections explain this rule in more detail, including how to calculate your deduction and how it applies differently to recreational vs. professional gamblers.
Recreational gambler
If you gamble recreationally, your gambling losses are deductible as an itemized deduction on Schedule A. Gambling losses include “the actual cost of wagers plus expenses incurred in connection with the conduct of the gambling activity, such as travel to and from a casino.” Here are a few examples of how to apply the new tax law:
A: You had $15,000 in gambling winnings and $10,000 in gambling losses during the year. You may claim an itemized deduction of $9,000, equal to 90% of your gambling losses. Even though you only gained $5,000 from gambling ($15,000 – $10,000), your taxable gambling income is $6,000 ($15,000 – $9,000) if you itemize your deductions.
B: You had $15,000 in gambling winnings and $16,000 in gambling losses during the year. You may claim an itemized deduction of $14,400, equal to 90% of your gambling losses. Even though you had an overall gambling loss of $1,000 ($15,000 – $16,000), your taxable gambling income after the allowable loss deduction is $600 ($15,000 – $14,400) if you itemize your deductions.
C: You had $15,000 in gambling winnings and $20,000 in gambling losses during the year. Although 90% of your losses is $18,000, the deduction can’t exceed your gambling winnings of $15,000. Therefore, you’re limited to a deduction of $15,000, resulting in $0 taxable gambling income ($15,000 – $15,000) if you itemize your deductions.
As a recreational gambler, if your itemized deductions (including deductible gambling losses) are less than the standard deduction, you may choose to take the standard deduction. In that case, you won’t be able to claim any of your gambling losses. Any unused deduction for gambling losses is lost – it can’t be carried forward to the next year.
Professional gambler
If you’re a professional gambler, you report your gambling income, losses, and expenses on Schedule C. This means you may claim your gambling losses regardless of whether you itemize or take the standard deduction. For professional gamblers, the new 90% rule applies to your combined overall gambling losses and business expenses. Business expenses may include items such as travel to casinos, overnight hotel stays, tournament fees, and other regular business expenses. When figuring your deductions on Schedule C, they can’t exceed 90% of your combined losses and expenses and are still limited to total gambling winnings. Here are a few examples:
A: Your gambling winnings for the year were $100,000. You had $25,000 in business expenses and $50,000 in gambling losses, for combined business expenses and losses of $75,000. Under the new 90% limitation, you may deduct $67,500, or 90% of $75,000, on Schedule C.
B: Your gambling winnings for the year were $100,000. You had $45,000 in business expenses and $65,000 in gambling losses, for combined expenses and losses of $110,000. Even though you had an overall loss of $10,000 as a professional gambler ($100,000 – $110,000), the new 90% limitation restricts your deductible expenses and losses to $99,000, or 90% of $110,000. Because $99,000 is less than your gambling winnings for the year, your deduction isn’t limited further. As a result, you have $1,000 of taxable gambling income ($100,000 – $99,000).
C: Your gambling winnings for the year were $100,000. You had $60,000 in business expenses and $70,000 in gambling losses, for combined expenses and losses of $130,000. You had an overall loss of $30,000 as a professional gambler ($100,000 – $130,000). The 90% limitation reduces your deductible expenses and losses to $117,000, or 90% of $130,000. However, because deductible expenses and losses can’t exceed your gambling winnings, your deduction is further limited to $100,000. As a result, you have $0 taxable gambling income ($100,000 – $100,000).
Tax planning for your gambling future
Whether you’re a professional or recreational gambler, you’ll want to consider the impact of this change on your tax bill each year. Beginning in 2026, you could have taxable gambling income even if your gambling losses equal or exceed your winnings. Careful recordkeeping and tax planning can help reduce surprises when you file your return. To avoid an unexpected tax bill, you can usually request income tax withholding from the payer, if your winnings don’t automatically trigger withholding. Alternatively, you may want to make an estimated tax payment to cover the expected tax on the portion of your winnings that may now be taxable.
The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, but the new rule specifically applies to tax years starting January 1, 2026. For the 2025 tax year and prior, gamblers can still deduct up to 100% of their gambling losses against their winnings.
Yes. Because you can only deduct 90% of your losses, breaking even or having a minor loss can still generate taxable income.
Example: If you win $10,000 and lose $10,000, your maximum allowable deduction is $9,000 (90% of $10,000). You will have $1,000 in taxable gambling income, even though your net financial gain was $0.
Recreational Gamblers: Deduct losses on Schedule A (Itemized Deductions). The 90% cap applies strictly to actual wagering losses plus related conduct expenses (e.g., travel). You must itemize to claim these losses; if you take the standard deduction, you cannot claim any loss deduction.
Professional Gamblers: Deduct on Schedule C. For professionals, the 90% cap applies to the combined total of gambling losses and business expenses (such as travel, hotel stays, and tournament fees). Professional deductions are available regardless of whether you itemize or claim the standard deduction.
No. Any unused or disallowed gambling loss deduction is permanently lost. It cannot be carried forward to future tax years or carried back to prior tax years.
Because this rule can create taxable “phantom income,” taxpayers should take proactive planning steps:
Adjust Tax Withholdings: Request voluntary tax withholding from the payer (e.g., casinos or sportsbooks) when receiving payout checks.
Make Estimated Payments: Pay quarterly estimated tax payments to cover the expected tax liability on the newly taxable portion of your winnings.
Maintain Strict Logbooks: Keep detailed records, logs, and receipts of all wagers, winnings, losses, and connected expenses to substantiate your allowed 90% deduction.
Suresh holds a Master of Commerce (M.Com) degree and is a dedicated personal finance researcher and writer. Combining his advanced academic background in commerce with deep industry research, he covers complex topics like taxation, banking systems, credit analysis, and personal finance strategies. As the founder of Tax Assistant (taxassistant.org), Suresh is committed to translating complicated financial guidelines and economic data into simple, accurate, and actionable educational resources for everyday readers.
