The new law gives the phrase “cutting losses” a whole new meaning. Gamblers currently deduct 100% of their losses from their winnings off their income taxes. But starting Jan. 1, 2026, under the new law, the deduction for losses goes down to 90%.<\/p>\n
While that 10% decrease may not sound like much, experts who study the industry say it would cut severely into a gambler\u2019s profits. In some cases, a professional gambler could owe taxes despite losing more than winning in a year.<\/p>\n
More: <\/strong>As sports betting skyrockets, more Americans search for addiction help, study finds<\/a><\/p>\n \u201cProfessional and high-stakes poker players, sports bettors and handicappers are about to be taxed out of business,\u201d said Nelson Rose, a law professor emeritus at Whittier Law School<\/a>. “Either that or they will move their action overseas to foreign jurisdictions that don\u2019t report gambling winnings to the IRS.\u201d<\/p>\n Phil Galfond, a professional poker player<\/a>, said on social media<\/a> \u201cwhat this means in plain English\u201d is that a gambler who wins $100,000 and loses $100,000 in one year will still owe tax on $10,000 of \u201cphantom\u201d income because only $90,000 of the losses will be deductible.<\/p>\n As the numbers ramp up, the implications become more dire for high rollers. A professional who wins $3 million and loses $2.8 million in one year would have earned $200,000 but will be taxed on $480,000.<\/p>\n \u201cYou could pay more in tax than you won,\u201d Galfond said on social media July 1<\/a>.<\/p>\n The change in tax law comes amid an explosion in online betting, through the widespread legalization of online sports wagering.<\/p>\n U.S. commercial gaming revenue reached an annual record<\/a> of nearly $72 billion in 2024, according to the American Gaming Association<\/a>. It was the fourth straight year of record revenue, up from $66.5 billion in 2023.<\/p>\n The total included nearly $50 billion in revenue at traditional casinos, nearly $14 billion through sports betting and $8.4 billion from online gaming. Online gaming rose from about $2.4 billion the previous year.<\/p>\n Story Continues <\/p>\n Gambling experts say the change in tax law could hurt professional gamblers who deal in razor-thin profit margins but probably not casual bettors.<\/p>\n In 11 states where sports gambling was legalized, people increased their betting from 99 cents to $4.63 per month, according to an academic study<\/a> by Wayne Taylor, Daniel McCarthy and Kenneth Wilbur. The study found \u201cthe vast majority\u201d \u2013 99% of players during a five-year period \u2013 deposited less than $20,500 in their accounts.<\/p>\n \u201cFor the casual bettor, the direct impact appears negligible,\u201d Taylor, an assistant professor of marketing at Southern Methodist University<\/a>, told USA TODAY. \u201cThis volume is unlikely to trigger the need for itemized deductions.\u201d<\/p>\n More: <\/strong>Big Beautiful Bill 101: What you need to know about the new law<\/a><\/p>\n The chips quickly add up for heavier hitters. The congressional Joint Committee on Taxation estimated<\/a> the gambling tax provision would generate more than $1 billion over 10 years for the federal government.<\/p>\n Taylor said professional gamblers facing higher taxes \u201ccould make professional gambling in the U.S. entirely unprofitable.\u201d<\/p>\n \u201cIt could mean paying more in taxes than they actually earn,\u201d Taylor said.<\/p>\n A risk to the industry and the governments that regulate it is that gamblers will stop reporting their income or move to gambling sites in other countries, according to industry experts.<\/p>\n Rose said a double-whammy for gamblers is that casinos, sports books and card rooms report big winnings to the IRS through W-2G or 1099 forms, but gamblers might not track their losses as diligently.<\/p>\n \u201cThe real risk is pushing high-volume players offshore,\u201d Taylor said.<\/p>\n Another potential beneficiary is the predictions market, which isn\u2019t regulated like gambling. Companies such as Kalshi<\/a>.com host\u00a0\u201ctrades\u201d about predictions like who might be elected president or whether the head of the Federal Reserve will be replaced.<\/p>\n One of the president\u2019s adult sons, Donald Trump Jr.<\/a>, said he became a strategic adviser to Kalshi in January after trading on the prediction that his father would win the 2024 election while \u201cbiased outlets called the race a coin toss.\u201d<\/p>\n \u201cI’m excited to be a part of what they’re building,\u201d the younger Trump said on social media Jan. 13<\/a>.<\/p>\n Industry lobbyists and Nevada lawmakers are trying to erase the two paragraphs from the nearly 900-page bill. But those prospects are uncertain because Republicans narrowly approved the carefully calibrated bill in the House and Senate, and the president has since signed it into law.<\/p>\n \u201cWe look forward to President Trump<\/a>\u2019s expected signing and will work closely with Congress in the coming months to address the changes to wagering deduction losses and further modernize the tax code,\u201d the American Gaming Association said in a statement<\/a> July 3.<\/p>\n Reps. Dina Titus, D-Nevada, and Ro Khanna, D-California, introduced legislation July 7<\/a> \u2013 three days after Trump signed the bill into law \u2013 to remove the provision.<\/p>\n \u201cThis common-sense legislation will bring fairness back to gaming taxation, making sure that gamblers can fully deduct losses when they report their winnings,\u201d Titus said on social media July 3<\/a>. \u201cWe should be encouraging players to properly report their winnings and wager using legal operators.\u201d<\/p>\n Seamus Magee, right, and Anthony Mea, both of Hoboken, New Jersey, watch the first games of the NCAA basketball tournament at the Meadowlands Racetrack, where sports fans can legally bet on March Madness games for the first time in New Jersey on March 21, 2019, in East Rutherford. <\/p>\n
Gambling chips in the top of the trophy during practice prior to the Emirates NBA Cup semi-finals at T-Mobile Arena on Dec. 13, 2024, in Las Vegas, Nevada. <\/p>\n
The High Roller Observation Wheel and the MSG (Madison Square Garden) Sphere lit up in blue are seen in Las Vegas, Nevada on July 3, 2025. <\/p>\n