Gambling, Sports Betting, & Your Taxes Under the One Big Beautiful Bill

Sports betting. Online casino games. Horse racing. In whatever form it takes, gambling is more popular now than ever. But starting in 2026, a new tax law on gambling losses could make your winnings much more expensive than you realize.

The One Big Beautiful Bill Act of 2025 introduces gambling changes that limit how much you can deduct. And it means you could owe tax even when you don’t come out ahead.

At Lothamer Tax Resolution, we want you to understand what these gambling changes mean so you’re not blindsided by a higher tax bill.

New Tax Law & Gambling Losses: What’s Changing in 2026

For decades, gamblers were allowed to deduct their losses up to the amount of their winnings. That meant if you won and lost the same amount in a year, you essentially broke even with the IRS.

Beginning in 2026, that’s no longer the case. Under the One Big Beautiful Bill:

• You can now only deduct 90% of your gambling losses against your winnings.
• Even if you “break even” or end up with a net loss, you’ll still have taxable income to report.

This affects both casual bettors and the professional gambler who itemizes deductions on Schedule A.

Gambling Winnings & Losses: Real-World Examples

Let’s look at how the new rule works in practice:

Example 1: Casual Gambler or Sports Bettor

You win $100,000 and lose $90,000 in the same year.

• Before 2026: Deduct full $90,000 → taxable income = $10,000.
• After 2026: Deduct only 90% of $90,000 ($81,000) → taxable income = $19,000
• Result: You owe tax on $9,000 more than your real net winnings.

Example 1: Professional Gambler

You win $1.1 million and lose $1 million.

• Before 2026: Deduct full $1,000,000 → taxable income = $100,000.
• After 2026: Deduct only 90% of $1,000,000 ($900,000) → taxable income = $200,000.
• Result: Your taxable income doubles, even though your actual profit hasn’t changed.

This “phantom income” creates a serious tax liability, because you’re paying federal income taxes on money you never actually kept.

How the New Betting & Sports Gambling Taxes Impact You

Whether you’re placing small bets on an app or making a living as a professional gambler, these changes will affect you.

Recreational Gamblers

If you win $600 or more on a bet, you’ll still get a W-2G form. The casino or sportsbook may withhold 24% of your winnings for federal taxes, but your actual tax bill could be higher depending on your income bracket.

Professional Gamblers

With the new deduction limit, you could face federal tax liability in years when you didn’t profit at all. Deducting gambling losses is now capped, which can leave you with taxable income in losing years. In fact, it could add tens of thousands—or even hundreds of thousands—of dollars to your tax bill.

Everyone

All gambling winnings are taxed as ordinary income and must be reported on your tax return. That means your betting income is added to your salary, bonuses, or other earnings when calculating your total tax bill.

How the New Betting & Sports Gambling Taxes Impact You

Whether you’re placing small bets on an app or making a living as a professional gambler, these changes will affect you.

Recreational Gamblers

If you win $600 or more on a bet, you’ll still get a W-2G form. The casino or sportsbook may withhold 24% of your winnings for federal taxes, but your actual tax bill could be higher depending on your income bracket.

Professional Gamblers

With the new deduction limit, you could face federal tax liability in years when you didn’t profit at all. Deducting gambling losses is now capped, which can leave you with taxable income in losing years. In fact, it could add tens of thousands—or even hundreds of thousands—of dollars to your tax bill.

Everyone

All gambling winnings are taxed as ordinary income and must be reported on your tax return. That means your betting income is added to your salary, bonuses, or other earnings when calculating your total tax bill.

What the IRS Expects from Your Gambling Activity

The IRS takes gambling income seriously, and reporting rules are not changing.

• You must report all gambling winnings, even if you don’t receive a tax form.
• You can only claim a deduction on Schedule A if you itemize your deductions; the standard deduction does not cover gambling losses.
• Keep detailed records of your gambling activity: dates, locations, amounts won and lost, and types of wagers.
• If you’re audited, the IRS will expect documentation for any losses you claim.

So, are gambling losses tax deductible in 2026?

Yes, but only up to 90% of the amount of your winnings. You can no longer fully offset winnings with losses.

It’s also important to note that gambling loss deductions are only available if you itemize your deductions and claim them on Schedule A. If you take the standard deduction, you can’t deduct losses.

How do I prove gambling losses on my taxes?

If you’re audited, the IRS will expect documentation for any losses you claim. That means you need to keep track of all betting slips, casino or sportsbook statements, and a personal log of gambling wins and losses.

Without proof, the IRS can deny your deductions, which may leave you with a larger tax bill than expected.

What tax rate applies to gambling winnings?

Gambling winnings are taxed as ordinary income under federal income taxes. Withholding is typically 24%, but your actual tax rate depends on your total income and tax bracket.

If I push, does that count as gambling winnings?

No. A push is considered a tie between you and the house (or another player). Your original bet is simply returned, and you don’t gain any profit. That means it does not count as gambling winnings.

Some online gambling platforms in the past showed pushes in the “win” column of account histories, which created confusion. In those cases, your balance didn’t actually increase—it only looked like a win on the report.

From a tax perspective, the IRS only considers money you actually gain as taxable gambling income. Since a push just gives you your stake back, it should not be included when you calculate or report gambling winnings and losses on your tax return.

If I gamble in a state where it’s legal but live in a state where it’s illegal, what do I do for taxes?

You must still report all gambling winnings on your federal income tax return, no matter where the bet was placed. The IRS treats gambling income as taxable whether you played in Las Vegas, online, or somewhere closer to home. Large payouts may also trigger a Form W-2G from the casino or sportsbook.

For state taxes, the rules are based on where you live, not where you gambled. Most states tax all income earned by their residents—even if it came from a state where gambling is legal and your state prohibits it. If the state where you won withheld taxes, you can often claim a credit on your resident return to avoid being taxed twice.

In short: the legality of gambling in your home state doesn’t change your tax obligation. Always report the income, keep thorough records of your gambling activity, and get help from a tax professional if you’re unsure how your state treats out-of-state winnings.

Why Planning Ahead for Paying Taxes on Gambling Income Matters

The bottom line: gambling now comes with a bigger tax bite. These changes can mean painful surprises at tax time if you don’t prepare.

• You could owe taxes even when you didn’t make a profit.
• State tax rules may be even stricter—some states, for example, Wisconsin, don’t allow gambling loss deductions at all on state returns.
• If you fall behind, penalties and interest can turn a small tax liability into serious debt.

Don’t Gamble With the IRS—Call Lothamer

If you bet on sports, play the lottery, or gamble professionally, you can’t afford to ignore these changes. The IRS will expect its share whether you win or lose, and tax problems only get worse the longer you wait to resolve them.

Lothamer’s licensed tax professionals help gamblers and taxpayers across the Midwest and across the country protect their finances and find the best path forward. We offer:

• Same-day representation to stop IRS collection actions
• Customized resolution strategies for your unique situation
• Over 40 years of proven results helping people break free from tax debt