Federal Government
Client Alert: Changes to Gambling Loss Deductions Under the One Big Beautiful Bill
Sep 23 2025 • 3 Min Read
Contributors
Public Law No. 119-21, 139 Stat. 72 (2025) — known as the One Big Beautiful Bill Act — introduces a change to the treatment of gambling losses under the Internal Revenue Code.
Gamblers could deduct up to 100% of their gambling losses, up to the amount of their winnings. For example, if someone had $100,000 in winnings and $100,000 in losses, they could deduct the full $100,000 in losses and pay no tax on their winnings.
Beginning with the 2026 tax year, gambling losses are only 90% deductible and remain capped at the amount of gambling winnings. Using the earlier example, if you win $100,000 and lose $100,000, you would be able to deduct only $90,000 of your losses. The remaining $10,000 would be treated as taxable income—even though, you broke even for the year. Below are examples of how the changes will affect individuals.
| Scenario | Before Jan. 2026 (Current Law) | From Jan. 1, 2026 (OBBB Act) |
|---|---|---|
| Winnings: $100,000 Losses: $100,000 | Deduction = $100,000 Taxable Income = $0 | Deduction = $90,000 Taxable Income = $10,000 |
| Winnings: $50,000 Losses: $40,000 | Deduction = $40,000 Taxable Income = $10,000 | Deduction = $36,000 Taxable Income = $14,000 |
| Winnings: $20,000 Losses: $25,000 | Deduction = $20,000 Taxable Income = $0 | Deduction = $18,000 Taxable Income = $2,000 |
Practical Effects
- Even when gamblers break even, they will now be required to report taxable income.
- Players’ behavior may change due to the reduced after-tax profitability of gambling.
- Operators may reassess the economics of promotional play, player incentives, and customer education on this change. (Promotional play often gives players bonus credits or free spins that inflate total winnings without any losses being put down on paper.)
Industry Pushback
The FAIR BET Act, H.R. 4304, 119th Cong. § 1 (2025).
Introduced on July 7, 2025, by Rep. Dina Titus (D-NV), co-chair of the Congressional Gaming Caucus, and co-sponsored by Rep. Ro Khanna (D-CA), this measure aims to restore the full 100% deduction for gambling losses. The American Gaming Association has expressed its support for the FAIR BET Act, emphasizing the importance of fair tax treatment.
The FULL HOUSE Act, S. 2230, 119th Cong. § 1 (2025).
- On July 9, 2025, Sen. Catherine Cortez Masto (D-NV) introduced a Senate companion called the “Full House Act.” She sought unanimous consent to pass it swiftly, but Sen. Todd Young (R-IN) blocked the move, stalling the effort.
The WAGER Act, H.R. 4630, 119th Cong. § 1 (2025).
- On July 23, 2025, Rep. Andy Barr (R-KY) filed the WAGER Act (H.R. 4630) — the Winnings and Gains Expense Restoration Act — which is the third federal bill aiming to restore the 100% deduction on gambling losses.
All three bills remain pending in their Chambers.
What’s Ahead
The One Big Beautiful Bill Act introduces a major shift in tax treatment for gamblers beginning in 2026, limiting the deductibility of gambling losses to 90% of winnings. This change means that even gamblers who break even may face taxable income. Bipartisan effort — including the FAIR BET Act, FULL HOUSE Act, and WAGER Act — demonstrates a concerted push to restore the full 100% deduction. However, with no immediate resolution in sight, taxpayers, gaming operators, and advisors may be forced to prepare for a new era of more limited gambling loss deductions unless Congress reverses course.
