What changed and when #
OBBB (P.L. 119-21) amended IRC §165(d) so that wagering losses are deductible only up to 90% of the loss amount, and — as before — never above winnings. The change takes effect for tax years beginning after December 31, 2025. Both limits stack: losses can never exceed gains, AND only 90% of losses count at all.
Three worked examples #
1. Net-LOSING year, still owes tax — the headline case
Winnings $100,000, losses $105,000. Deduction = min(90% × 105,000, 100,000) = $94,500. Taxable phantom income = $5,500. At 24% marginal that's $1,320 in federal tax on a year you actually lost $5,000.
2. Breakeven year
Winnings $100,000, losses $100,000. Deduction = 90% × 100,000 = $90,000. Phantom income $10,000. Under 2025 rules the same year zeroed out.
3. Big-loss year where gains bind first (no phantom income)
Winnings $50,000, losses $80,000. 90% × 80,000 = 72,000, but the winnings cap kicks in first — deduction = $50,000. Phantom income = 0. The 90% rule only bites when your losses are close to (or below) 111% of your winnings.
Standard-deduction bettors have always had phantom income #
For recreational gamblers, wagering losses are an itemized deduction on Schedule A. If you take the standard deduction, you can't deduct gambling losses at all — your entire winnings amount is taxable, and this was true long before OBBB. The 90% cap simply stacks on top for itemizers. See our Standard vs Itemized guide to decide.
Sessions (slot machines) vs individual wagers #
For slot play, the IRS and the Tax Court measure a win or loss per session rather than per spin (Notice 2015-21; Shollenberger v. Commissioner): you have a gain or loss when the session ends and you cash out. The IRS's proposed safe harbor in that notice treats one calendar day of electronically tracked slot play at one casino as a session. IRS guidance hasn't extended session netting to other gambling; its own manual notes the use of "session" has historically been limited to slot machine play. For sports bets, table games and races, record each wager's result, and don't net winning bets against losing ones. Winning sessions and wagers are your winnings, losing ones are your losses, and the 90%-and-gains cap applies on top.
Professional gamblers #
If you gamble as a trade or business, you report winnings, losses and expenses on Schedule C rather than Schedule 1 and Schedule A (Pub. 525), so the deduction doesn't depend on itemizing. Wagering losses AND otherwise-deductible business expenses (travel, tournament entries, data services) are combined under the same 90%-and-gains cap starting 2026. From 2018 through 2025, losses and business expenses together were already capped at winnings (TCJA), so a professional gambler could not show a Schedule C loss even when expenses alone exceeded gambling income. Before 2018, expenses could exceed winnings. From 2026 the deduction is 90% of the combined losses and expenses, and still no more than gambling gains.
Repeal watch — as of 2026-10-04 #
Multiple bills would restore the 100% deduction. One, H.R. 10357, has cleared committee; none has passed Congress. The 90% rule is live law for 2026.
- Digital Asset Tax Certainty Act §701H.R. 10357(Rep. Jason Smith)
- FULL HOUSE ActH.R. 6985 / S. 2230(Reps. Horsford & Miller)
- FAIR BET ActH.R. 4304(Rep. Titus)
- WAGER ActH.R. 4630(Rep. Barr)
Record-keeping #
- Casino/sportsbook win-loss statements — request one per venue per year.
- A gambling log kept per session for slots, per wager otherwise: date, venue, game/type, amount wagered, amount won or lost.
- ATM receipts, wire records, and cashless-wagering statements corroborate the log.
- Keep records for at least 3 years after filing (7 for the paranoid).
Sources & References #
Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.