A little-noticed provision in the One Big Beautiful Bill Act means gamblers can no longer deduct the full amount of their losses against their winnings, starting with the 2026 tax year. The sweeping law, signed on 4 July 2025, caps the deduction at 90 percent of losses. One consequence: a player who breaks even for the year, or even loses money overall, can still owe federal income tax on income they never actually kept.

The change has drawn criticism from lawmakers in both parties, prompted at least three separate repeal bills in Congress, and left tax professionals telling frequent gamblers to start keeping better records now, well before the first affected returns are filed in early 2027.

From 100 Percent to 90 Percent

Under the prior rule, a casual gambler who itemized deductions could write off gambling losses dollar for dollar, up to the amount of their winnings for the year. Win $50,000 and lose $50,000 in the same year, and your net taxable gambling income was zero. Section 70114 of H.R. 1, the One Big Beautiful Bill Act (Public Law 119-21), changed that starting with tax years beginning after 31 December 2025. Only 90 percent of documented losses can now be deducted, still capped at the amount of winnings reported.

Why Preparers Are Calling It “Phantom Income”

Run that same $50,000-and-$50,000 example through the new rule and it no longer nets to zero. Only $45,000 of the losses is deductible, leaving $5,000 in taxable income even though the player didn’t actually profit. Tax professionals and lawmakers have taken to calling this phantom income: it’s taxed as if it were real earnings despite reflecting no actual gain.

Same numbers, new rule

Scenario: $50,000 in winnings, $50,000 in losses, same tax year

Before 2026: 100% of losses deductible → $0 in net taxable gambling income

From 2026 onward: 90% of losses deductible ($45,000) → $5,000 in taxable income

Casual Players vs. High-Volume Bettors vs. Professionals

• Casual gamblers who itemize on Schedule A. They’re the only ones who could claim a gambling loss deduction in the first place, capped or not.
• Frequent players and high-volume bettors, where the gap between winnings and the deductible share of losses compounds into a real tax bill.
• Professional gamblers filing Schedule C. The 90 percent cap applies to their wagering losses too, and they still can’t claim a net loss from gambling as a business.

Casual players who take the standard deduction rather than itemizing were already unable to deduct gambling losses under the old rule, so this specific change doesn’t add a new burden for them.

The W-2G Reporting Threshold Moved Too

The same legislation also raised the threshold at which casinos must issue a W-2G form for slot, bingo, and keno winnings, from the longstanding $1,200 and $1,500 marks to $2,000, indexed for inflation in future years. That works in the opposite direction: fewer small wins get formally reported, which is generally read as a minor offset to the loss-deduction cap rather than a real win for players.

Three Repeal Bills, Zero Votes So Far

Nevada Democrat Rep. Dina Titus introduced the FAIR BET Act within days of the law’s passage to restore the full deduction, and a companion Senate bill followed from Sen. Catherine Cortez Masto. A separate, Republican-backed bill, the FULL HOUSE Act, followed in January 2026 with bipartisan co-sponsors of its own.

None of these bills has passed. The House Rules Committee declined to advance the FAIR BET Act as an amendment to the 2026 defense authorization bill in January, and the Senate version of the FULL HOUSE Act still sits in the Finance Committee without a scheduled hearing. Republican senators including Todd Young of Indiana and James Lankford of Oklahoma have resisted fast-tracking a reversal. The 90 percent cap remains in effect for the 2026 tax year.

Any of these bills could still move, and at least one sponsor has floated making a repeal retroactive to the start of 2026 if it does pass. Worth checking current status before assuming this rule holds exactly as written by the time you file.

Before You File

• Keep a detailed, contemporaneous log of sessions: dates, locations or platforms, amounts won and lost. Documentation is what makes any deduction possible in the first place.
• Don’t assume a break-even year means no tax liability under the new rule. Run the math, or have a professional run it, before filing season surprises you.
• Talk to a tax professional about estimated payments if you gamble frequently or at high stakes. Phantom income can create a larger bill than expected.
• Remember this covers federal tax law only. State treatment of gambling losses varies independently and isn’t addressed here.