Major Changes to Gambling Loss Deductions Under the OBBBA: What Taxpayers Need to Know
Published on by Trevor Instine in Tax Services
The One Big Beautiful Bill Act (OBBBA) brings significant changes to the way gambling losses are treated for tax purposes, effective for tax years beginning after December 31, 2025. If you’re a professional gambler or simply someone who occasionally tries their luck at the casino, it’s important to understand how these new rules may impact your tax bill.
What’s changing for gambling losses?
Under prior law, taxpayers could deduct gambling losses up to the amount of their gambling winnings as an itemized deduction. In other words, if your gambling losses for the year were equal to or greater than your gambling winnings for the year, you could fully offset those winnings and have net zero taxable income from gambling winnings.
OBBBA changes the rule by introducing a new limitation to this itemized deduction. Starting in 2026, you’re limited to deducting the lesser of 90% of your gambling losses or 90% of gambling gains incurred in the year. This means that even if your gambling losses exactly match or exceed your winnings, you’ll still have to pay tax on the remaining 10% of your gambling winnings.
For example, assume you have $10,000 in winnings and $8,000 in losses. The limitation of loss deduction is $7,200 ($8,000 x 90%) generating taxable gambling income of $2,800. If you have $10,000 in winnings and $20,000 in losses, the loss is limited to 90% of gains so the deduction is only $9,000 leaving a gambling profit of $1,000.
But wait, there’s more!
This limitation is set to take effect as of January 1, 2026, but recently there have been bills introduced to the House and Senate that would repeal the 90% limitation and allow for gambling losses to fully offset gambling winnings. Although neither bill has been passed, there’s strong bipartisan support for this change.
What counts as a gambling loss under OBBBA?
The definition of “losses from wagering transactions” includes not just the cost of your bets, but also related expenses incurred in the course of gambling. It’s important to note that related expenses must be an integral cost in placing a wager such as mandatory fees to participate in a tournament. Expenses incurred to facilitate gambling, for example, travel to a casino, meals, and other related costs are considered personal costs and are non-deductible.
Reporting of gambling losses
One aspect of deducting gambling losses that hasn’t changed under the OBBBA is how to report them. This deduction will remain an itemized deduction and should be reported on Schedule A of your Form 1040. To claim this deduction, you should maintain thorough records of your gambling activity that show the amount of losses you are reporting is accurate.
What to do next
Have any questions about how the OBBBA’s changes to gambling losses could affect you? Contact us today for a free consultation with one of our experienced tax advisors. You can also learn more about what the OBBBA means for individuals and businesses here. As always, we’re here to help.
