US Gamblers Face Tax on Losses Under New IRS Rule

By John Isaac,
Editor at online-gambling.com

John Isaac Editor at online-gambling.com

John Isaac is an editor with many years of experience in the gambling industry. He writes expert articles on card games like blackjack and poker. In addition, he is also well aware of the US gambling laws and the Indian and Dutch gambling markets. You can rely on verified information and insightful details.

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Last updated: July 15, 2026

New IRS cap means US gamblers can owe tax even on losing years.

US bettors could soon owe federal income tax on money they never actually pocketed. A new law caps gambling loss deductions at 90% of winnings from the 2026 tax year, so players who break even can still face a bill. The IRS holds a public hearing on the rule on July 17, 2026. The change has already drawn a bipartisan repeal effort in Congress.

How the 90% Loss Cap Works

Until now, gamblers who itemized could deduct losses up to the full amount of their reported winnings. The One Big Beautiful Bill Act, signed on July 4, 2025, changed that: from the 2026 tax year, only 90% of losses can be offset against winnings. The shift affects anyone wagering real money at licensed US gambling sites, from casual slots players to full-time professionals.

The practical result is a tax on income that was never earned. Consider a player who wins $100,000 and loses $100,000 over a year:

• Total winnings: $100,000, all reported as income
• Total losses: $100,000, but only $90,000 is now deductible
• Taxable “phantom income”: $10,000 the player never actually kept
• Result: a federal tax bill on a break-even year

What the July 17 Hearing Can and Can’t Do

The IRS hearing covers the proposed regulations (REG-113229-25) that set out how the cap will be enforced. The distinction matters: the hearing decides the fine print, not the rule itself. Only Congress can repeal the underlying law, and the American Gaming Association and professional poker groups are expected to testify.

Critics, including Representative Dina Titus, argue the change punishes players for breaking even and could push high-volume bettors toward unregulated offshore sites. That would undercut the very tax revenue the measure is meant to raise.

Gamblers would be literally paying taxes on money they don’t have.

Dina Titus, US Representative (D-Nevada)

Can the Cap Still Be Repealed?

Efforts to reverse the cap have stalled. Representative Titus introduced the FAIR BET Act within days of the law passing, and a separate bipartisan bill, the FULL HOUSE Act from Representatives Max Miller and Steven Horsford, followed soon after. Neither has advanced. The House Rules Committee declined to move the FAIR BET Act forward in January 2026.

In the Senate, Catherine Cortez Masto (D-Nevada) tried to fast-track a repeal by unanimous consent in July 2025, but the request was blocked. Not everyone sees a problem: Senator James Lankford (R-Oklahoma) called it “a pretty minor change in that tax policy.”

How Players Can Protect Themselves

For now, the cap stands, and the July hearing will not change that. The heaviest burden falls on high-volume and professional players, who can rack up large winnings and losses that roughly cancel out yet still trigger a bill on the 10% gap. Recreational players who never itemize are less exposed, but anyone reporting sizable jackpots should take note.

The safest move is to keep detailed records. Every session, deposit, and withdrawal matters when losses can only partly offset wins, so thorough logs are now more valuable than ever. Players comparing their online casino and betting options for 2026 should weigh the tax treatment alongside bonuses and odds, and consult a tax professional before filing.