Gamblers were among those who got to keep their tax breaks back in 2017 when he Tax Cuts and Jobs Act (TCJA) made substantial changes to the Internal Revenue Code.
That Republican tax reform measure let gamblers continue to claim their losses up to the extent of their reported winnings.
But the latest GOP bill that extended the TCJA provisions beyond this year, aka the One Big Beautiful Bill (OBBB) Act, is not so tax friendly to gamblers.
Sure, the gambling loss write-off now is permanent, meaning bettors don’t have to worry about it expiring any time soon.
But starting in 2026, gamblers will be allowed to count only 90 percent of their losing wagers against their taxable winnings.
Some lawmakers, however, are not letting the new gambling tax loss limit ride. They’ve upped the ante by introducing legislation to restore the offset using 100 percent of losses.
As you would expect, the lawmakers come from states whose economies rely on the gaming industry.
Rep. Dina Titus (D-Nevada) introduced the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET) Act on July 7. The bill has so far picked up 10 cosponsors, and is pending in the Ways and Means Committee.
The bottom line for bettors is that Titus’ bill, officially H.R. 4304, would restore the 100 percent deduction for gambling losses. That way, said Titus in announcing her bill, “gamblers don’t pay taxes on money they haven’t won.”
Phantom income: The taxes on money not won also is often called phantom income.
Phantom income is, in tax terms, money that is taxable even though the funds weren’t actually received by the taxpayers. That applies to gamblers now facing the new loss limit, argue opponents of the OBBB change.
Here’s a simplified example for a gambler who won $100,000 and then lost $100,000 in a tax year. Under the current law, that bettor could use all of the 100 grand lost to zero out the $100,000 in taxable winning bets.
But beginning Jan. 1, 2026, using that same hypothetical gambling win/loss amounts, that bettor can deduct only $90,000 of the losses. The Internal Revenue Service will demand tax due on the remaining $10,000 phantom income even though the bettor actually broke even.
Similar Senate measure: Two days after the House bill was introduced, Nevada Democratic Sen. Catherine Cortez Masto announced a similar measure, the Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE) Act.
That bill, S. 2230, has three cosponsors and is pending Senate Finance Committee action.
Cortez Masto tried to speed up the legislative process on July 10, going to the Senate floor to seek unanimous consent that her bill be discharged from the Finance Committee and passed.
Her effort was rejected, despite Cortez Masto’s argument that the reduction in the gambling loss deduction is not just an issue in Nevada.
“Gaming exists across country, almost in every state,” she told her colleagues. “There’s so many people that are going to be impacted by this.”
Cortez Masto added that while she was disappointed that her unanimous consent request was rejected, “I am not done.”
Fiscal implications: Titus and Cortez Masto obviously are concerned about any tax law that could hurt the Silver State economy, which relies in large part on tourists who come to gamble.
The lawmakers, however, might find money to be a problem in their efforts to change the gambling loss deduction.
The Joint Committee on Taxation (JCT) has projected that the 90 percent gambling loss claim will bring the U.S. Treasury roughly $1.1 billion over ten years.
You also might find these items of interest:
- Illinois budget includes new per-wager sports betting tax
- IRS missing $1.4 billion in tax due from unreported gambling winnings
- 15%-to-25% tax rate range is part of proposed internet gambling template
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