New Gambling Tax Law Limits Deductibility of Losses
- HFM CPAs + Business Advisors
- Dec 16, 2025
- 2 min read
A significant change to federal gambling tax rules is set to take effect in 2026, and it could mean that some gamblers will owe taxes on income they never actually received.
This new provision, part of the One Big Beautiful Bill Act (OBBBA), limits the deductibility of gambling losses to 90% of winnings.
The result: even gamblers who break even or lose money could face a tax bill.
What’s Changing?
Currently, gamblers can deduct their losses up to the amount of their winnings, meaning they only pay tax on their net gambling income.
Starting in 2026, the new law will cap the deduction for gambling losses at 90% of winnings.
This means that if a gambler wins $100,000 and loses $100,000, they can only deduct $90,000 of those losses—leaving $10,000 subject to tax, even though they didn’t actually make a profit.
Who Will Be Affected?
Professional gamblers will be the most impacted, as they often have large swings in winnings and losses.
Hobbyists who itemize deductions may also see higher tax bills.
The change could also affect state tax returns, as many states follow federal rules.
Potential Consequences
Some gamblers may owe taxes on unrealized income, which is money they never actually received.
In certain cases, the effective tax rate could exceed 100% of actual winnings.
The new rule may push more gamblers to treat their activity as a business, allowing them to deduct related expenses, or to seek gambling opportunities outside the U.S.
Lawmakers have introduced bills to modify or delay this provision, but as of now, it is scheduled to take effect for the 2026 tax year.
What Should Gamblers Do Now?
Keep detailed records of all gambling wins and losses.
Consult with a tax professional to understand how the new rules may affect your situation.
Monitor legislative updates in case the law changes before 2026.
Questions?
Contact HFM CPAs for questions on how this may affect your specific situation. Our team stays current with evolving tax and related legislation to help you navigate new opportunities and requirements.
HFM CPAs provides specialized accounting, tax, and assurance services to individuals and businesses across Connecticut and Rhode Island.