Imagine breaking even after a year of high-stakes poker or losing money and still owing taxes. Sounds absurd, right? That’s exactly what the One Big Beautiful Bill Act (OBBBA) does. Beginning in 2026, this new U.S. tax law limits gambling loss deductions to just 90% of your losses, even when your wins match your losses. This post dives into why that matters, who’s affected, and how you can prepare.
1. What Exactly Is Changing in the Tax Code?
The OBBBA amends IRS Code §165(d) by making the 100% loss deduction cap permanent—but slashes it to 90% starting tax year 2026. In plain talk: even if you break even, the IRS will tax you on 10% of your “phantom income.”
2. How This Affects Different Types of Gamblers
Whether you’re a casual weekend bettor or a pro poker player, this law hits. Recreational players may feel the pinch in break-even years. Professionals—operating on slim margins—face potential ruin.
Related topic – One Big Beautiful Bill Act (OBBBA): What Americans Need to Know
For example, under the new rule: Win $100,000, lose $100,000? You’ll be taxed on $10,000. That’s money you never actually made.
3. Gambling Loss – Real‑World Numbers: Examples & Case Studies
Let’s talk numbers:
| Scenario | Before OBBBA | After OBBBA |
|---|---|---|
| Win $100K, Lose $100K | Deduct $100K → Taxable $0 | Deduct $90K → Taxable $10K |
| Pro: Win $10M, Lose + Expenses $11M | Losses and expenses fully deductible (Mayo ruling) | No deduction → Taxable on full $10M income; net out-of-pocket loss |
The landmark analysis by the Tax Foundation shows poker pro Daniel Negreanu would see his take‑home pay cut from around $114K to just $66K under the new rule—nearly halving his income.
Worse yet, Joe the Pro Gambler, who breaks even, loses $1M in cash but owes taxes on phantom income.
4. Why Did Congress Make This Change?
Two reasons: First, reconciliation rules (Byrd Rule) require revenue-generating changes. Dropping from 100% to 90% delivers that impact. Second, permanentizing the TCJA’s Mayo override tightens deduction rules.
Read this Topic no. 419, Gambling income and losses from IRS Official Site
5. Industry Reaction & Legislative Pushback
The gambling world cried foul. Pro players like Phil Galfond called it “the end of many pro gamblers’ careers.” Casinos fear losing high-volume clients—and tax revenue in the long run as bettors shift offshore.
Lawmakers have responded. Senator Cortez Masto and Rep. Dina Titus introduced the FAIR BET Act to restore the full deduction. Yet, Senate Republicans—like Todd Young—have blocked attempts at repeal so far.
FAQ on Gambling Loss: What Taxpayers Often Ask
What is the new gambling loss deduction limit under OBBBA?
Starting January 1, 2026, you can only deduct up to 90% of your gambling losses—and only up to your winnings. So even a break-even year could still yield taxable income.
Who is most affected by this change?
High-volume and professional gamblers with thin net margins are hit hardest. Casual players may also face unexpected taxes on break-even years.
Why did lawmakers limit the deduction?
It was added during reconciliation to raise revenue and align with rules limiting deductions on professional gambling‑related business expenses.
Will this provision raise much revenue?
The Joint Committee on Taxation estimates about $1.1 billion over 8–10 years.
Is there any effort to repeal it?
Yes, Rep. Dina Titus and Sen. Cortez Masto are pushing the FAIR BET Act to restore full deductibility. But repeal faces political hurdles.
How can gamblers prepare?
Track wins and losses meticulously. Consider tax planning strategies or revisiting your activity classification (Schedule A vs. C) with a CPA.
Are non-residents affected?
Yes. Non-resident aliens must itemize and still face the 90% cap. They can not use the standard deduction and may owe tax even with net losses.
Does this affect slot reporting thresholds?
Separately, the bill raised the IRS reporting threshold for slots from $600 to $2,000—good news for casual slot players.
Conclusion on Gambling Loss: What Should You Do Next?
This law twist is a real head‑scratcher—paying taxes on money you did not earn? Go figure. But don’t panic. Here’s your action plan:
- Begin tracking gambling wins, losses, and expenses in detail (even today).
- Consult a tax pro for Schedule A vs. C planning and potential strategies.
- Follow legislative developments—FAIR BET Act could restore fairness.
- Form alliances or industry groups, as some pros are doing—they have sway.
Keep calm and gamble smart—but anticipate paying taxes on your “phantom income.”
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