Gamblers Now Owe Tax on Money They Never Won. The Fix Is Stuck in Congress.
- The 90 percent gambling loss deduction cap took effect Jan. 1, 2026. Bettors can now deduct only 90 percent of their losses against their winnings, so a gambler who wins $100,000 and loses $100,000 owes federal tax on $10,000 of income despite breaking even.
- It applies to everyone who wagers, casual and professional, and across sports betting, poker, casino play, lottery, and horse racing. Professional gamblers get no loss carryforward to soften a bad year.
- The cap came from the One Big Beautiful Bill Act, signed July 4, 2025. The Joint Committee on Taxation scored it to raise roughly $1.1 billion over eight years.
- Three repeal bills, the FAIR BET Act, the FULL HOUSE Act, and the WAGER Act, have all stalled. A fast-track Senate attempt was blocked by Sen. Todd Young, a defense-bill amendment was rejected, and Sen. James Lankford now opposes repeal outright.
- Rep. Dina Titus filed a discharge petition in February 2026 to force a House floor vote. It needs 218 signatures and, as of early March, had drawn only two: Titus and one Texas Republican.
The federal gambling loss deduction changed on Jan. 1, 2026, and the change is now real money out of real pockets. Under the old rule, a gambler who itemized could deduct losses up to the full amount of winnings, so a person who won and lost the same amount in a year paid nothing on the wash. That is over. Beginning with the 2026 tax year, only 90 percent of losses are deductible, and the deduction is still capped at the amount of winnings. The arithmetic is unforgiving. Win $100,000, lose $100,000, and you can write off $90,000. The remaining $10,000 is taxed as income you never actually kept.
The cap is not a proposal or a threat anymore. It is law, and the Treasury has built the machinery to collect it. In May 2026 the IRS published implementing rules confirming the 90 percent limit and spelling out how it works on joint returns. Tax preparers and bettors filing for 2026 will meet it head-on next spring.
The mechanism is what makes this severe, so it is worth being precise about who it hits. The cap applies to casual players and full-time professionals alike, and it reaches every form of legal wagering: sports betting, casino games, the lottery, pari-mutuel horse racing, and online poker. It bites hardest on high-volume, thin-margin players. A poker pro who wins $1 million in tournaments and loses $1 million chasing them breaks even on the felt but owes tax on $100,000. There is no relief valve. Professional gamblers have never been allowed to carry a losing year forward to offset a winning one, the way an ordinary business can, and this law does nothing to change that. Critics call the result phantom income, tax on profit that exists only on paper.
The provision arrived almost by accident, which is part of why it has provoked such bipartisan irritation. It was not in the House version of the bill. It surfaced in the Senate Finance Committee, chaired by Sen. Mike Crapo of Idaho, during the reconciliation scramble to make the budget math work, and it rode through on the strength of the larger package. The Joint Committee on Taxation, which scored the bill’s Senate Finance tax provisions, estimated the change would raise about $1.1 billion over eight years. When the bill reached the House, Titus tried to strip the provision out. The bill passed without her amendment, and President Donald Trump signed it on July 4, 2025.
Many of the lawmakers who voted for it did not know it was there. Sen. Chuck Grassley said he did not know how it got in. Sen. John Cornyn said he did not know what it did. That confession of inattention has become the rallying point for the people trying to undo it.
The repeal effort is broad, bipartisan, and so far completely stuck. Three bills carry the same basic goal of restoring the 100 percent deduction. In the House, Titus introduced the FAIR BET Act on July 7, 2025, alongside Rep. Ro Khanna. A second House measure, the WAGER Act, came from Rep. Andy Barr, a Kentucky Republican, giving the cause a sponsor in the majority party. In the Senate, Sen. Catherine Cortez Masto introduced the FULL HOUSE Act on July 9, joined by fellow Nevada Democrat Jacky Rosen and Texas Republican Ted Cruz. Titus called the cap a tax increase “on Americans who gamble.” Cortez Masto put it more bluntly when she introduced her bill, warning that affected players would “literally be paying taxes on money they don’t have.”
None of the three has moved. The clearest illustration came on July 10, 2025, when Cortez Masto asked the Senate to pass the FULL HOUSE Act by unanimous consent, a procedure that clears a bill instantly if no senator objects. Sen. Todd Young, an Indiana Republican, objected. Young said he supported restoring the full deduction, but he wanted to attach an unrelated provision restoring a tax break for certain religious institutions, and he would not let the bill pass without it. Cortez Masto declined the trade. The bill went to the Finance Committee and has sat there since.
The House route closed next. In August 2025 Titus filed the FAIR BET Act as an amendment to the annual defense authorization bill, a vehicle almost certain to become law and a common landing spot for unrelated measures. The Republican-controlled House Rules Committee declined to make the amendment in order, and the chance to reach a floor vote that way evaporated.
Then the politics hardened. In early January 2026, Sen. James Lankford, an Oklahoma Republican who sits on the Finance Committee, came out against repeal, telling Punchbowl News he saw the cap as “a pretty minor change” in tax policy. His position carries weight because of where he sits and because Oklahoma, with more than 100 tribal and commercial gaming facilities, has one of the densest gambling economies in the country. Lankford has said he worked on the provision at one stage but would not claim authorship of the final language. Whatever the paternity, his opposition signaled that the Senate path runs uphill.
By February, Titus was out of conventional options. On Feb. 12, 2026, she filed a discharge petition, a rarely successful procedural tool that can drag a bill out of a stalled committee and onto the House floor if a majority of members sign it. The threshold is 218 signatures. As of early March it had drawn only two, Titus and Rep. Troy Nehls, a Texas Republican who signed on Feb. 23. That gap is the tell. The FAIR BET Act carries roughly two dozen bipartisan cosponsors, but cosponsoring a popular bill costs a member nothing, while signing a discharge petition is a public rebuke of one’s own leadership, and almost no one has been willing to pay that price over gambling deductions.
The industry has lined up behind repeal without moving the needle. The American Gaming Association has made restoring the full deduction a top legislative priority, and the FAIR BET Act has picked up backing from MGM, Caesars, Wynn, DraftKings, FanDuel, the Nevada Resort Association, and the National Thoroughbred Racing Association. The pressure has gone celebrity, too. On May 11, 2026, UFC President Dana White wrote to Trump urging him to push Congress to scrap the cap, arguing it makes legal betting in the United States irrational and shoves players toward offshore books that pay no tax and offer no consumer protection, and away from the regulated, legal US gambling sites the industry spent years building. The letter, confirmed by CNBC and ESPN, was the highest-profile industry intervention yet, and the reaction was measurable. On the Kalshi prediction exchange, the odds of repeal before 2027 jumped from the teens to near 30 percent after the news broke. White and Trump are longtime allies, which is part of why the letter landed. Around the same time, the House Ways and Means Committee, where the bills have sat for the better part of a year, was reported to be weighing a hearing on sports-related tax issues, the first real hint of committee movement.
Trump himself has been noncommittal. Asked in December whether he would consider ending taxes on gambling winnings, he said he would “have to think about that,” which is not a policy.
For now, the cap stands, and even the fresh attention has not changed that. Repeal has bipartisan sponsors in both chambers, deep-pocketed industry support, and a genuine equity argument on its side, and it is losing anyway to committee inertia, a hostile Rules Committee, and at least one determined opponent on Senate Finance. The people feeling it most are the regular bettors across Nevada’s casinos and sportsbooks and the grinding poker professionals whose entire model assumes they can deduct what they lose. Until Congress acts, the rule is simple and harsh. You can break even for the year and still owe the government money.
This article covers a federal tax change. If gambling has stopped being fun or feels hard to control, confidential help is available 24/7 through the 1-800-GAMBLER national helpline.