🎰 Current Rules Through 2025

For now, the rules are semi straightforward — though not favorable to the gambler:

• Winnings: All gambling winnings are fully taxable and must be reported on your tax return, whether you receive a Form W-2G.
• Losses: You may deduct gambling losses, but only as an itemized deduction and only up to the amount of your winnings. 

2025 Example (assuming you already itemize deductions on schedule A):

• Win $50,000, lose $50,000 → Deduction equals $50,000 if you itemize deductions. 
• Result: $0 taxable gambling income.

⚖️ What Changes in 2026? Let's call it the 90% Rule: 

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, alters the balance beginning January 1, 2026 and sticks the daggar in a little deeper.

• Losses are only 90% deductible (still capped at your winnings). In Joe's example, he will only be able to itemize $6,300 (90% X $7,000) in gambling losses. 

📊 Why This Matters

• Casual gamblers may be caught off guard by owing taxes even when they didn’t profit.
• Professional gamblers face even greater challenges, since their expenses (travel, meals, entry fees) are also caught in the 90% limit.
• The change is expected to generate billions in tax revenue, but it puts more financial pressure on individuals who gamble regularly.

📝 Record-Keeping Is Non-Negotiable

The IRS expects detailed documentation of gambling activity, including:

• A log of dates, locations, and amounts wagered.
• Receipts, wagering tickets, or casino statements.
• Copies of Form W-2G when issued.

Without solid records, deductions are easily challenged — and now, with the 90% cap, accuracy matters more.

🏛️ The Legislative Outlook

Not everyone agrees with this change and lawmakers from states with large gaming industries (like Nevada and New Jersey) are pushing bills to restore the 100% loss deduction. The FAIR BET Act has been introduced, but repeal efforts have so far stalled. 

For now, the 90% rule is set to take effect in 2026 — and taxpayers should plan accordingly.

📌 Planning Ahead: Protect Yourself

Here are proactive steps to stay ahead of the IRS:

• Run simulations: Compare your 2025 and 2026 tax liability under the new rule.
• Plan for phantom income: Even if you expect to break even, budget for potential tax liability.
• Consider withholding or estimated payments: Especially if you gamble heavily, to avoid underpayment penalties.
• Work with a CPA: A professional can help you structure records, prepare deductions properly, and advise if legislative changes occur. At Alto CPA Group, LLC, we help clients navigate new and complex tax rules like this one. Don’t gamble with your financial future — let us guide you to the right strategy.