New Gambling Loss Deduction Rules: How the One Big Beautiful Bill Act Impacts Your Taxes

However, if your losses total $12,500, your deduction is limited to $10,000. Critics say it unfairly targets an already heavily regulated industry and could reduce legal betting participation. Lawmakers from states that benefit financially from sports betting (like New Jersey, Nevada, and Pennsylvania) may push to roll it back or at least raise the 90% cap. This law doesn’t only affect sports bettors, it also impacts casino players who win or lose money playing blackjack, craps, slots, and roulette.

That not only siphons revenue from legal businesses, but also undermines efforts at regulation and responsible gambling. That said, taxpayers shouldn’t bet the house that this recent tax change will be reversed and should instead prepare for their betting income to receive a different tax treatment starting next year. The state where you live generally taxes all your income — including gambling winnings. However, if you travel to another state to place a bet, you might be surprised to learn that the other state wants to tax your winnings.

The 2025 US gambling tax law, passed as part of the “One Big Beautiful Bill Act,” introduced a major shift in how gamblers report their winnings and losses. The most significant change is a cap on the amount of gambling losses that can be deducted from winnings on federal tax returns. Prior to this law, gamblers could deduct 100% of their losses, meaning that if your wins and losses balanced out over the course of the year, you owed no taxes.

Of course, the higher stakes the gambler, the more significant the tax hike will be. As reported by ESPN, this means that even if a taxpayer breaks even or incurs a small loss, they will still owe taxes. If you gamble—whether it’s slots, cards, or sports betting—there’s a new tax rule you need to know about. Starting January 1, 2026, you can’t deduct all your gambling losses anymore.

How Does The Gambling Deduction Change Affect Me?

That said, you’re required to report all gambling winnings, even those that didn’t necessitate a tax form. All bets that result in a win are considered income, and the taxpayer will owe taxes on that win. For example, if someone goes to a blackjack table, bets and wins $100, that $100 is considered income, and the taxpayer owes taxes on the $100 earned in the same way as someone who goes to work as a barista and earns $100. The following rules apply to casual gamblers who aren’t in the trade or business of gambling. Gambling winnings are fully taxable and you must report the income on your tax return.

Here’s what you need to know about this change and its implications for both casual and professional gamblers. Repeated violations can lead to escalated enforcement actions, including audits that uncover discrepancies and result in additional penalties. Persistent non-compliance may result in license revocation, barring operators from conducting gambling activities in the state. Maintaining compliance is critical to avoid financial and operational repercussions. The Illinois Gaming Board conducts audits and inspections to ensure operators follow state laws.

The provision first generated buzz online after the Senate passed the legislation on Tuesday. Taxes are due monthly, coinciding with the submission of financial reports, and must be remitted to the Illinois Department of Revenue by the 15th of the following month. The gaming industry brought in a record high of nearly $72 billion last year, according to the American Gaming Association. Professional gamblers have also warned about the impact of the provision. I’d imagine the same would be true for casinos in Detroit and a million other spots where many people choose to legally gamble.

Galfond said that the amendment could result in tax being owed on “phantom” winnings, which will have a particularly detrimental impact on high-stakes players. The US gambling industry has seen substantial growth in recent years, boosted by the expansion of online platforms and the popularity of regulated betting services. Even professional gamblers must follow the same 90% limit starting in 2026. At a 24% tax rate, that’s a $480 tax bill for someone who thought they broke even. If you don’t keep detailed records or misunderstand the new rule, you could even underpay and get flagged by the IRS.

Let’s break down what’s changing, why it matters, and how it could leave you with a tax bill even if you didn’t come out ahead at the casino. Even though you broke even, you’ll now be taxed as if you made a profit. The changes are a bigger deal to gamblers than the brief amount of text might suggest.

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The Illinois Department of Revenue and Illinois Gaming Board may impose financial sanctions, interest on overdue taxes, and even license suspension or revocation. Interest charges are calculated under the Illinois Uniform Penalty and Interest Act, which establishes a structured penalty framework. This guide provides insights into Illinois’ gambling taxation framework, focusing on reporting, payment, and potential penalties for non-compliance.

While the state can audit compact-related tax contributions, it cannot impose additional taxes beyond what the agreements stipulate. Meanwhile,internet searches for gambling addiction and calls to state gambling helplines have increased, particularly among younger is sheesh casino legit men. Meanwhile, internet searches for gambling addiction and calls to state gambling helplines have increased, particularly among younger men. As a result, everyone from professional poker players to young gamblers using an app to bet on football are screaming foul and viewing the change as a 10% penalty of sorts. A $1,000 win in 2026 and afterward will mean that you can only deduct 90% of your losses — or $900 in this example.

“The US gambling tax law creates a disconnect between actual profits and reported income. A client could end the year breaking even but still owe hundreds or thousands in taxes. That’s not fair and it’s not how most of the tax code is designed to work,” says Thomas Brennan, CPA, a tax advisor based in Philadelphia who works with both recreational gamblers and professional poker players. Taxpayers can only deduct gambling losses if they itemize their deductions and keep a record of winnings and losses. What’s more, the amount of losses you deduct can’t be more than the amount of gambling income you reported. That means that even if you’re a net loser for the year, you can only claim losses up to the amount of your winnings.

• This law places a bigger burden on bettors, especially those who play often or across multiple platforms.
• Gamblers should keep an eye on developments heading into 2026, while there are ways to be tax savvy when at the casino or beyond.
• Non-compliance with Illinois gambling tax regulations can result in severe penalties.
• The state has prosecuted individuals attempting to conceal substantial gambling winnings, particularly in cases involving organized betting operations or unreported casino jackpots.

Final thoughts: New rules, higher risk – especially for those abroad

Examples of covered activities include blackjack, craps and roulette games. A record of the number of games played, the cost of cards purchased and the amounts collected on winning cards. Since 2018, these rules have been in place temporarily, and they were set to expire after 2025. Gamblers should keep an eye on developments heading into 2026, while there are ways to be tax savvy when at the casino or beyond.

Oklahoma requires all gambling income to be accurately reported, with both players and gaming establishments bearing specific obligations. The OTC mandates that casinos issue a Form W-2G to players who receive winnings above certain thresholds. This form details the amount won, any taxes withheld, and must be included in state and federal tax returns. Even if no tax was withheld at the time of payout, individuals are legally required to disclose all gambling income.

The original House resolution intended to only make the limitation of gambling losses equal to gambling winnings permanent. Since its proposal early on July 7, it has gained bipartisan support with Rep Troy Nehls (R-Texas). Under current law, gamblers are allowed to deduct 100% of their losses, up to the amount of their gambling winnings. But the final version of the legislation — set to be signed by Trump during a White House ceremony Friday — modifies that rule. This law places a bigger burden on bettors, especially those who play often or across multiple platforms. Even casual gamblers who previously ignored recordkeeping now risk being surprised by unexpected tax bills if their deductions don’t meet the 90% rule.

Transparency, including access to financial records and cooperation with regulators, is essential. Non-compliance can lead to fines, suspension, or license revocation, underscoring the importance of adhering to regulatory standards. Illinois facilitates compliance through MyTax Illinois, an electronic platform for filing returns and payments. This system reduces administrative errors and simplifies the process for operators.

If the amendment makes its way into the House version of the bill and is signed into law, it would reduce the ability of gamblers to turn a profit. It could also push professional gamblers to unregulated operators outside the U.S., according to American professional poker player Phil Galfond. The rules apply to casino games, sports betting, poker tournaments, lottery tickets, horse racing, and other forms of legal gambling. Some clients have asked whether reclassifying their gambling activity from a business to a hobby might help them sidestep the change.

“Maintaining this deduction at its existing levels was absolutely a priority for the legal, regulated gaming industry,” the gaming industry source said. This shift also benefits gambling operators, or “the house,” indirectly. Professional gamblers tend to be the ones who consistently come out ahead, unlike casual players who mostly lose money. Lottery winnings are also taxed, with a 4.95% withholding tax on prizes over $1,000, consistent with the state’s individual income tax rate.

Galfond added that the amendment could push professional gamblers toward offshore, unregulated gambling operators, while ensuring that amateurs – who are more likely to lose – increasingly dominate the U.S. market. This means that if a gambler wins $100,000 in a tax year while also losing $100,000, they would be required to pay $10,000 in tax despite breaking even, rather than zero tax paid under current regulations. A section of the Senate’s 940-page version of the bill limits the amount gamblers are able to deduct from their winnings to 90 percent of losses. This shift could weaken U.S. sportsbooks and lead to more illegal gambling. Ironically, while the law aims to collect more tax revenue, it might cause the government to collect less if fewer bets are placed in legal markets.