The State of the 2026 Gambling Deduction Changes – Latest

The State Of The 2026 Gambling Deduction Changes

Unabated Staff
Professional Gambling
July 9, 2025

 

A last-minute change to the tax code in the Big Beautiful Bill – also known as H.R. 1 – will  dramatically change how gambling winnings are taxed in the United States starting in 2026. The new gambling tax law limits how much of your losses you can deduct, even if you’re a casual sports bettor.

That means higher tax bills for people who didn’t actually make more money. It would mean breakeven and, in some instances, losing players end up owing taxes on money they don’t have. 

Here’s what’s in the law, how it affects you, and what’s being done to revert these changes. 

Last Updated: July 18, 2025

Jump to [Where Things Stand] [Further Reading] [What Happened] [How Does This Affect Me?] [What Does it Mean to the Industry?] [What Can I Do?]

Where Things Stand With the Gambling Deduction

  • Sen. Catherine Cortez Masto (D-NV) sat in with poker pro Doug Polk to talk about her unanimous consent bid. The big takeaway, after Sen. Todd Young (R-IN) skunked the easy fix, is that Cortez Masto is still working the back channels to push through a resolution before the end of the year. “We need a clean version of this. My next step procedurally here is, we can hotline things.
    In other words, we can we can put it on the internet and between all of the Senate offices and say, ‘Does anybody object to this?’ and see who’s out there still objecting to it. I’ve also talked to to Todd and I said, ‘Come on, there’s no way we’re going to be able to get what you what you want done. Would you be willing to work with me and figure out how we can still get the act passed?’ And he said, ‘Yes, I will say that.’ So, we’re we’re in conversations right now to try to still get it done.”

  • The FULL HOUSE Act is now in play. Follow its progress here.
  • Sen. Catherine Cortez Masto (D-NV) will introduce her own bill to repeal the provision in the Senate today, the FULL HOUSE Act. According to the Huffington Post, Cortez Masto will use a procedure called unanimous consent. This would expedite passage, but all it takes is one senator to skunk the whole thing.Fun aside in the HuffPo piece: apparently no one else on the Finance Committee knew this provision was even there. ‘If you’re asking me how it got in there, no, I don’t know,’ Sen. Chuck Grassley (R-IA) said … ‘I don’t know anything about it. I’m not sure what it does,’ Sen. John Cornyn (R-TX) added. … Sen. Thom Tillis (R-N.C.), another member of the committee, called it ‘bad policy.’”If you can stomach sitting through Senate proceedings, you can watch it all live.
  • Rep. Dina Titus (D-NV) introduced the FAIR BET Act (H.R. 4304) on July 8. This bill would restore your ability to deduct 100 percent of gambling losses up to the amount of winnings.
  • It was co-sponsored by Rep. Ro Khanna (D-CA), Rep. Troy Nehls (R-TX), Rep. Stephen Horsford (D-NV), Rep. Jeff Van Drew (R-NJ) and Rep. Mark Amodei (R-NV)..
  • The bill has been referred to the House Ways and Means Committee. You can follow its progress in Congress.
  • The Big Beautiful Bill was signed into law on July 4. It takes effect Jan. 1, 2026.

Unabated Weighs in, and Other Media


What Happened?

  • On May 22, 2025, the House of Representatives passed the original text of the One Big Beautiful Bill Act. This version didn’t contain any changes to gambling losses in the tax code. It passed by one vote.
  • After wrangling over several changes to the bill, the Senate votes to pass its version on July 1. It passed 51-50, with Vice President J.D. Vance casting the tiebreaker. 
  • Shortly after, it came to light that one new provision in the bill changed Section 165 of the tax code. The law said, “Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.” In other words, 100% of losses are deductible up to the amount you win in a year. 
  • The Senate version of the bill amended that language. It now reads “the amount allowed as a deduction for any taxable year shall be equal to 90 percent of the amount of such losses during such taxable year, and shall be allowed only to the extent of the gains from such transactions during such taxable year.” 
  • The change was ushered in by Sen. Mike Crapo (R-ID), chairman of the Senate Finance Committee. Though Crapo’s office has declined to comment on the matter, there’s speculation that the provision was introduced to settle a parliamentary requirement under the Byrd Rule that governs reconciliation bills. 
  • The Joint Committee on Taxation ballparked $1.1 billion in revenue over eight years with this change, but didn’t consider the unintended consequences in that calculation: “However, driving away sharps could significantly diminish revenue from the federal excise tax on sports betting: 25 cents for every $100 wagered. Sharps are thought to account for 25 to 50 percent of the money wagered legally on sports,” according to the Washington Post.
  • Ahead of a self-imposed July 4 deadline from President Trump, the House passed H.R. 1, by a 218-214 margin. It included the Senate’s changes.
  • The tax changes will take effect Jan. 1, 2026.

How Does The Gambling Deduction Change Affect Me?

 

  • For anyone who itemizes their deductions, the new laws have the potential to drastically increase your tax liability.
  • If a bettor had $2 million in winnings against $1.9 million in losses, their net profit is $100,000. Under 2025 rules, they could deduct all $1.9 million in losses. For a single filer, that could mean a $17,000 federal tax bill, assuming no other deductions. In 2026, that same bettor would only be able to deduct $1.71 million. Their federal income tax liability could be nearly $74,000 under this new rule. They’d be paying taxes on $190,000 of phantom income.
  • This has the potential to turn profitable bettors into ones who could owe more than they actually earn.

 


What Will This Mean for the Sports Betting Industry?

  • As sharp bettors look for tax relief, they’re less likely to participate in the legal, regulated markets
  • In the short term, operators may be glad to have fewer sharp players in the market, but it’ll mean less liquid markets. Less liquid markets mean operators are more likely to offer bets with worse odds and higher holds. It means potentially smaller betting menus, and fewer jobs in the industry.

 

  • Sharps could flee back offshore where operators aren’t required to issue any paperwork to stay in compliance with the IRS. But money made offshore is still considered taxable U.S. income. For anyone trying to comply with the letter of the law, taking their action offshore isn’t a cure-all.
  • One potential beneficiary of all this is Kalshi, the prediction market platform. Kalshi contracts aren’t taxed like gambling wins. 

What Can I Do?

 

  • Make friends with your accountant and/or tax attorney. You’re going to need him or her in 2025.
  • Maximize your deductions in 2025, including any and all expenses if you’re filing as a professional. Expenses can include things like software and subscriptions like Unabated, as well as traveling to conferences.
  • Document everything. Make sure your records are precise, and continue to be heading into 2026.
  • Study up on sessioning. How a “gambling session” is defined will impact your bottom line. There’s no current hard-and-fast guidance, but CPA Zak Zimbile said, “The unfortunate answer is: each wager is most likely a session. There is no language that applies directly to sports betting, but there is language that applies to horse racing and that can be applied to sports betting. That being said, there are always certain scenarios that arise (arbs, for instance) where sessions need to be adjusted. (Arbirtrage bets) are one bet and the net result should be reported as such. It is a reasonable position to take that you would never bet Game B if you didn’t have an arb opportunity with Game A.”One approach to sessioning would to record your results day-by-day at each sportsbook. If you had $500 in winnings at FanDuel and $450 in losses at DraftKings on July 9 and $700 in winnings at BetMGM but $600 in losses at Caesars on July 10, you would have $1,200 in winnings against $1,050 in itemized losses. A more aggressive approach would be to document your final tally at each book over the course of a betting season. Always discuss your approach with your tax professional.
  • Contact your representatives. With the bill currently in committee, you can make an impact if you live in the district of a member serving on that committee. Here’s the list of current Ways and Means members:

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