Starting January 1, 2026, the gambling loss deduction is capped at 90% of your losses under the One Big Beautiful Bill Act signed on July 4, 2025. The old rule let you deduct losses up to the full amount of your winnings, so a break-even year meant no federal tax on gambling. That is no longer true. The revised 26 U.S.C. ยง 165(d) allows you to deduct only 90% of what you lost, and the deduction still cannot exceed your winnings for the year.1Office of the Law Revision Counsel. 26 USC 165 Losses
How the Two Caps Work Together
Two limits apply at the same time. First, your deduction cannot go above 90% of your losses. Second, it cannot go above your total winnings. Whichever number is smaller is what you actually deduct.
The 90% cap bites hardest when your losses are close to your winnings. Take a gambler who won $100,000 across a year and also lost $100,000. Under the prior rule, the two amounts cancel and no federal tax is owed. Under the new rule, 90% of $100,000 in losses is $90,000, so $10,000 of the winnings is taxable even though the year was a wash in reality.2U.S. Representative Dina Titus. LVRJ Bill Introduced to Combat Anti-Gambling Measure in Trumps Budget Bill The Congressional Budget Office estimates the change will raise about $1.1 billion over a decade.
Now flip the numbers. If you won $3,000 and lost $4,000, 90% of your losses is $3,600, but the winnings ceiling holds the deduction at $3,000. Here the 90% rule does not change anything, because the winnings cap is already the tighter limit. That is the pattern: the 90% rule matters when losses roughly match or exceed winnings, and the winnings ceiling controls when losses run well past winnings.
Who Feels the Cap Most
Professional gamblers face the sharpest hit. Someone reporting $1 million in winnings against $1 million in documented losses would now show $100,000 in taxable income on a break-even year. The statute makes no distinction between professionals and recreational players when applying the 90% cap.1Office of the Law Revision Counsel. 26 USC 165 Losses
Recreational players face a separate hurdle before the cap even comes into play. To deduct gambling losses at all, you have to itemize on Schedule A instead of taking the standard deduction. Many casual gamblers take the standard deduction, which means the loss deduction is unavailable to them regardless of what the cap says. If your total itemized deductions do not exceed the standard deduction, the 90% question is moot for your return.
All Winnings Are Still Taxable
The cap changes what you can deduct, not what you have to report. Every dollar of gambling winnings is taxable income, whether or not the payer issues a W-2G.3Internal Revenue Service. Gambling Income and Losses Winnings go on the “Other income” line of Schedule 1 (Form 1040), including small hits from table games, informal poker, and online sportsbooks that never generate a tax form.4Internal Revenue Service. Form W-2G Certain Gambling Winnings Losses are what the 90% cap governs; the reporting rule for winnings is untouched.
Note also that the same 2025 law raised the W-2G reporting threshold for slots and bingo from $1,200 to $2,000, and the IRS has proposed matching regulations.5Internal Revenue Service. Internal Revenue Bulletin 2026-19 That is a separate change about when casinos file paperwork and does not affect the 90% loss cap or your obligation to report winnings.
Recordkeeping Matters More Now
Because losses are worth less on a dollar-for-dollar basis, documenting them well is more valuable, not less. The IRS expects a diary or similar log covering the date and type of each wager, the name and location of the gambling establishment, the people with you, and the amounts won or lost.6Internal Revenue Service. Diary or Similar Record
Back the diary up with supporting documents: wagering tickets, W-2G forms, bank withdrawal records, credit records, and any payout slips from the casino.6Internal Revenue Service. Diary or Similar Record Casino loyalty program win/loss statements can help but usually will not stand alone in an audit without the underlying detail. The burden of proof sits with you.
Efforts to Repeal the Cap
The 90% cap drew immediate pushback from the gaming industry and from some members of Congress who voted for the broader bill. Senators Ted Cruz and Catherine Cortez Masto introduced the FULL HOUSE Act, which would restore a 100% loss deduction for professional gamblers who treat gambling as a trade or business, arguing that taxing people on income they never actually received is unfair.7U.S. Senator Ted Cruz. Sens Cruz Cortez Masto Lead Bipartisan FULL HOUSE Act
Whether that bill will pass is unclear. The cap generates meaningful revenue, and any repeal would have to identify offsetting savings. For returns covering 2026, the 90% limit is the operative rule for every gambler, professional and recreational alike.
What to Do Before Year-End
If you gamble regularly, three things are worth checking before you file a 2026 return. First, confirm whether itemizing will beat the standard deduction on your return; if it will not, the loss deduction is unavailable and the cap does not affect you. Second, if you do itemize, keep a contemporaneous log rather than reconstructing losses from memory later. Third, if your winnings and losses tend to run close together, expect a tax bill on paper even when your net result is flat, and plan cash flow accordingly.