New Federal Tax Rule Makes Breaking Even Bad
A new federal tax rule limits how much
gambling losses can be deducted from winnings.
What’s Going On:
Starting January 1, 2026, a new federal tax rule limits how much gambling losses can be deducted from winnings
Bettors can now deduct only 90% of their losses against their winnings for tax purposes — down from a full 100% previously.
This Seemingly Small Shift Creates a New Problem:
If you break even over the year, e.g. $100,000 won and $100,000 lost, you’ll now have to report $10,000 in taxable “phantom income” - even though no real profit was earned.
Why You Should Care:
Unexpected Tax Liability: You and bettors may owe tax on income they never actually pocketed.
Reporting Complexity: As before, losses only offset gambling income if you the taxpayer itemizes deductions - which not everyone does.
Unawareness Is Common: Past surveys show that you and many other bettors don’t even realize you must report gambling winnings.
Who’s Most Affected:
High-stakes and professional gamblers - where large losses and winnings are common - are most likely to see meaningful tax bills under the new rule.
Casual players - who don’t itemize or whose gambling doesn’t exceed IRS reporting thresholds may see little change.
Industry & Legislative Pushback:
Nevada lawmakers, casino leaders and bipartisan members of Congress are pushing plans to reverse the 90% cap, arguing it could hurt the gaming industry and local economies that rely on tourism and wagering.
Proposals such as the FAIR BET Act (House) and FULL HOUSE Act (Senate) aim to restore the full 100% deduction - but progress is uncertain as we enter 2026.
Summary:
Effective Date: Jan. 1, 2026.
New Rule: Only 90% of losses deductible against winnings.
Result: Potential tax on “phantom income”.
Most Impacted: High-stakes and professional gamblers.
Not sure if this applies to you? Then please feel free to reach out by clicking here
See Kyle Chouinard’s CPA Practice Advisor’s article, or Tobias Salinger’s Accounting Today’s article, or other sources for more information.