How Much in Gambling Losses Can You Deduct: 90% Cap and Itemizing

For tax years beginning in 2026, how much gambling losses you can deduct is capped two ways: you can write off 90 percent of your losses for the year, but never more than the total you won that year, and only if you itemize on Schedule A.¹ Whichever number is smaller is your deduction. Losses beyond that disappear. They cannot offset wages, investment income, or any other category.

The 90 Percent Cap in Practice

Before 2026, the rule was simpler: you could deduct 100 percent of your losses up to the amount you won. The new 90 percent limit takes a 10 percent slice off the top of your losses before the winnings ceiling is even applied. Tax professionals call the result phantom income, meaning taxable dollars with no actual profit behind them.

Three scenarios show how the math runs:

You win $100,000 and lose $100,000. Ninety percent of your losses is $90,000. Your winnings are $100,000. You deduct the smaller number, $90,000, and pay tax on $10,000 despite breaking even.
You win $50,000 and lose $40,000. Ninety percent of your losses is $36,000. Your winnings are $50,000. You deduct $36,000 and pay tax on $14,000, even though you actually came out $10,000 ahead.
You win $20,000 and lose $30,000. Ninety percent of your losses is $27,000, but the winnings cap limits you to $20,000. You deduct $20,000. The remaining $10,000 in net losses is gone.

The 90 percent haircut hurts most when your losses come close to your winnings. If you lost far more than you won, the winnings cap binds first and the 10 percent slice becomes irrelevant, though that is small consolation when the excess losses vanish either way.

You Have to Itemize or the Deduction Is Zero

Gambling losses are only deductible on Schedule A.² Take the standard deduction and you forfeit the write-off entirely: your full winnings are taxed with no offset.

For 2026 the standard deduction is $16,100 for single filers, $32,200 for joint filers, and $24,150 for heads of household.³ Itemizing only pays off when your gambling losses combined with mortgage interest, state and local taxes, charitable contributions, and medical expenses clear that threshold. If they do not, switching to Schedule A just to claim losses can actually raise your tax bill.

Married couples filing separately face an extra trap. If one spouse itemizes, the other must itemize too, even if their own standard deduction would have been larger. Run the numbers for both returns together before deciding.

Why the Deduction Does Not Cancel Out Your Winnings

You cannot net your gambling results and report the difference. The IRS wants the full amount of your winnings on Schedule 1 as other income, and your losses separately on Schedule A.² Win $40,000 and lose $40,000, and you report $40,000 in income and up to $36,000 in losses after the 90 percent cap. Reporting zero is not an option.

That structure matters beyond the return itself. Gross winnings raise your adjusted gross income even when the loss deduction wipes out the profit, because Schedule A deductions reduce taxable income but not AGI. Higher AGI can shrink Affordable Care Act premium tax credits, trigger IRMAA surcharges on Medicare Part B and Part D, make more of your Social Security benefits taxable, and phase out credits like the Child Tax Credit. A big year at the tables can quietly raise costs that have nothing to do with your tax bill.

Records That Support the Number You Claim

The IRS expects an accurate diary or log of your gambling, backed by supporting documents.² Rough estimates do not hold up in an audit. Your log should show:

The date and type of activity, whether that is a slot session, a sports bet, a poker tournament, or a lottery purchase.
The name and address of the casino, racetrack, sportsbook, or website.
How much you won or lost during the session.
Names of anyone with you, which can help corroborate your account.

Back the diary with W-2G forms, wagering tickets, canceled checks, credit card statements, and bank withdrawal records that line up with the dates you logged. Online sportsbooks and gambling apps generate transaction histories and year-end statements. Download them and save your own copies, because platforms can change retention policies without warning.

Keep everything for at least three years after filing, which matches the general audit statute of limitations.⁴ If you underreported income by more than 25 percent the window stretches to six years, so holding records longer is the safer default.

Where the Numbers Go on Your Return

Report the full amount of your gambling winnings on Schedule 1 (Form 1040) as other income, which flows into your total income on Form 1040. Include amounts already subject to withholding, and include winnings that fell below any reporting threshold. Unreported income is a common audit trigger for gamblers, and the IRS often has W-2G data before you file.

Deductible losses go on Schedule A under “Other Itemized Deductions.” The figure you enter cannot exceed the winnings reported on Schedule 1, and it must reflect the 90 percent cap. Schedule A then attaches to your Form 1040.

Professional Gamblers

If gambling is your trade or business, you report on Schedule C instead of splitting income and losses across Schedule 1 and Schedule A, and you can deduct ordinary business expenses like travel, data subscriptions, and tournament entry fees. Starting in 2026, though, the same 90 percent limit applies to a professional gambler’s combined losses and business expenses.¹ A pro who wins $200,000 with $200,000 in combined losses and costs can deduct only $180,000, producing $20,000 of taxable income from an activity that generated no actual profit.

Qualifying as a professional gambler is a high bar. The IRS looks at whether you gamble regularly with a genuine profit motive, keep businesslike records, and rely on gambling as your primary livelihood. A hot streak does not qualify you, and claiming the status incorrectly invites scrutiny.

Non-Resident Aliens

If you are not a U.S. citizen or resident alien, U.S. gambling winnings are generally taxed at a flat 30 percent, or a lower treaty rate, and reported on Form 1040-NR using Schedule NEC.² Non-resident aliens who are not Canadian residents generally cannot deduct gambling losses at all. Canadian residents may offset losses against winnings under the U.S.-Canada tax treaty. Everyone else is taxed on gross winnings with no loss deduction.

State Taxes Can Change the Answer

Federal rules only cover half the return. Each state sets its own treatment of gambling income and losses. Some states fully conform to the federal itemized deduction, letting you deduct losses up to winnings when you itemize on your state return. Others disallow the deduction entirely, taxing gross winnings with no offset no matter what you claim federally. A few fall in between with partial deductions or their own caps, and states without an income tax sidestep the question. Check your state’s tax authority before assuming a federal deduction carries over.

1
Office of the Law Revision Counsel. 26 USC 165 Losses
2
Internal Revenue Service. Topic No. 419, Gambling Income and Losses
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. How Long Should I Keep Records