Gambling OBBBA Beginning December  32st, 2025

Kort Redick, CPA 

A major change to the tax treatment of gambling losses is coming in 2026, following the enactment of the One Big Beautiful Bill Act (H.R. 1, OBBBA). Under Section 70114 of the law, a new limitation on the deductibility of gambling losses will apply to all taxpayers, regardless of whether they gamble professionally or recreationally.

Beginning with tax years after December 31, 2025, only 90 percent of gambling losses can be deducted, and only up to the amount of gambling winnings. This amends Internal Revenue Code §165(d), which previously allowed a full deduction of gambling losses against winnings. For example, under current law, a person with $100,000 in winnings and $100,000 in losses pays no tax on gambling income. Starting in 2026, that same taxpayer will be able to deduct only $90,000 of their losses, resulting in $10,000 of taxable income even if there is no net profit.

This 90 percent limitation applies across the board. The statute includes no exceptions for professional gamblers or those who engage in gambling as a trade or business. Both recreational and professional gamblers will be subject to the same rule.

The provision is projected to raise approximately $1.1 billion in federal revenue over eight years. However, it has drawn significant criticism from within the gambling industry. Organizations like the American Gaming Association argue that the change unfairly taxes gross winnings instead of net income, especially for players who wager frequently but end the year with little or no profit. Critics also point out that this treatment is inconsistent with the general principles of the tax code, which typically allow losses to offset income fully within the same category.

As a result of the new rule, gamblers who previously broke even may now owe taxes. For instance, under the new law, if a person wins $100,000 and loses $100,000, only $90,000 of the losses will be deductible, meaning $10,000 of their winnings will be taxable. By contrast, in 2025, that same scenario would result in no taxable gambling income.

In short, the One Big Beautiful Bill Act introduces a strict cap on the deductibility of gambling losses, effective beginning in 2026. The law limits deductions to 90 percent of losses and allows them only to the extent of winnings, with no exceptions based on the taxpayer’s status as a professional. While the change is expected to generate substantial revenue, it represents a significant shift in how gambling activity is taxed and has raised serious concerns within the gambling community.