Gambling App Taxes Rise as Usage Increases
- A new federal tax rule, taking effect in 2026, will limit the amount of gambling losses taxpayers can deduct, potentially increasing tax liabilities for those who gamble.
- The proliferation of sports betting adn online gambling has led to increased scrutiny of related tax implications.
- This means that for the 2026 tax year (filed in 2027), gamblers will no longer be able to fully offset their winnings with losses.The change will impact how...
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Gambling Loss Deduction Changes: What Taxpayers Need to Know
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A new federal tax rule, taking effect in 2026, will limit the amount of gambling losses taxpayers can deduct, potentially increasing tax liabilities for those who gamble.
The New Rule: A 90% Deduction Limit
The proliferation of sports betting adn online gambling has led to increased scrutiny of related tax implications. As of January 1, 2026, the federal tax code will change to limit the deductions gamblers can take on their losses.This change, part of the One Big Beatiful bill
signed into law this summer, will cap gambling loss deductions at 90% of winnings, a decrease from the previous 100% according to Fox 5 Las Vegas.
This means that for the 2026 tax year (filed in 2027), gamblers will no longer be able to fully offset their winnings with losses.The change will impact how gamblers report their income and expenses on Schedule 1 (Form 1040).
How the Deduction Limit Works: An Example
Previously, if a gambler won $1,000 and lost $1,000, they could report $0 in taxable gambling income. Under the new rule, only $900 of the $1,000 in losses can be deducted. This leaves $100 of winnings subject to income tax.Essentially, even breaking even could result in a tax liability.
| Scenario | Winnings | Losses | Deductible Losses (Old Rule) | Deductible Losses (New rule – 2026+) | Taxable Income |
|---|---|---|---|---|---|
| Winning Scenario | $1,000 | $0 | $0 | $0 | $1,000 |
| Breaking Even | $1,000 | $1,000 | $1,000 | $900 | $100 |
| Losing Scenario | $500 | $1,000 | $500 | $450 | $50 |
why the Change?
The change is part of a larger tax bill, officially known as the Tax Cuts and Jobs Act, enacted in December 2017. While the specific rationale for altering the gambling loss deduction wasn’t extensively debated in public, it’s generally understood to be a revenue-raising measure. The Joint Committee on Taxation estimated that limiting the deduction would generate approximately $1.4 billion in revenue over ten years.
What Gamblers Need to Do
For tax years 2023 and 2024, gamblers can continue to deduct 100% of their gambling losses