Effective for tax years beginning January 1, 2026, a new federal law—the One Big Beautiful Bill Act (OBBBA)—changes how gambling losses can be deducted. This update may increase taxes for both casual and professional gamblers, even if your activity breaks even or results in a net loss.

What is Changing?

Before 2026

  • Gambling losses were deductible up to 100% of gambling winnings (if you itemized).
  • Result: If winnings and losses were equal, no taxable gambling income.

Starting in 2026

  • Gambling losses are deductible at only 90% of losses, and only up to the amount of winnings.
  • Applies to all itemizers, including professional gamblers.
  • If you take the standard deduction, gambling losses are still not deductible (no change).

Why This Matters: “Phantom Income”

Under the new rule, you may owe tax on income you never actually kept. Even if your gambling activity nets to zero, or a loss, you could still have taxable income.

Example 1:

Scenario Old Law (Through 2025) New Law (2026 and after)
Winnings $50,000 $50,000
Losses $50,000 $50,000
Deductible Losses $50,000 $45,000
Taxable Gambling Income 0 $5,000

 

If you are in the 24% tax bracket, this results in $1,200 in federal income tax on activity where you actually broke even.

  • Old Law (Through 2025): $0 taxable income –> $0 tax
  • New Law (2026 and after): $5,000 taxable income –> $1,200 tax

 

Example 2: 

Scenario New Law (2026 and after)
Winnings $100,000
Losses $110,000
Allowable Deduction (90%) $99,000
Taxable Gambling Income $1,000

You lost $10,000 overall but still owe tax on $1,000.

 

Key Takeaways

  • The 90% loss limitation applies to all itemizing taxpayers.
  • Loss deductions cannot exceed reported winnings.
  •  Standard deduction filers still cannot deduct losses.
  • Detailed recordkeeping is more important than ever.
  • You may owe tax even if you break even or lose money.

 

What You Should Do

  • Track everything: Maintain logs, receipts, tickets, and online statements.
  • Plan ahead: If you expect significant gambling activity, talk with us early.
  • Get guidance: We can help you understand the tax impact and plan to minimize surprises.

At Abacus!, we are here to help you navigate these new rules with confidence. Our goal is to make sure you understand how this change affects your tax situation and help you plan ahead effectively.