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The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025 (Public Law 119‑21), introduces significant changes to how gambling losses are taxed. Beginning January 1, 2026, taxpayers will only be able to deduct 90% of their gambling losses, even if those losses equal or exceed their winnings. This effective date and the legislative intent are explicitly laid out in Section 70114 of the Act: “Beginning on January 1, 2026… 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”.
Under previous rules, taxpayers could offset their gambling winnings dollar-for-dollar with their losses—so breaking even meant having no taxable income from gambling. Now, under the new provisions, even a break-even year will show a taxable gain. For instance, if someone wins $100,000 and loses $100,000, the deduction drops to $90,000—leaving $10,000 treated as taxable income.
This change applies to all forms of legal gambling—from casino games and poker tournaments to sports betting, lotteries, and horse racing. Even professional gamblers fall under this rule. The Joint Committee on Taxation estimates this provision will raise approximately $1.1 billion in revenue over the next eight years.
The new limit requires meticulous recordkeeping. Taxpayers must still itemize deductions and provide documentation of both gambling losses and gains. Failure to maintain accurate records could result in unfavorable tax outcomes.
To summarize:
• Law signed: July 4, 2025 (OBBBA, Public Law 119‑21)
• Effective date: January 1, 2026 — new limitation begins for tax year 2026
• Deduction limit: Only 90% of gambling losses are deductible against winnings
• Implications: Break-even gamblers may show taxable income; estimated $1.1 billion generated over eight years
Taxpayers who gamble regularly—or pay close attention to gains and losses—will need to adjust their tax planning strategies accordingly. Always consult with your tax professional.
