Gambling taxes,
and the new phantom-income trap.

Field guide

The 90% cap, and why it taxes money you didn't keep.

Gambling has always had unusually strict rules for deducting losses — you could only ever offset losses against winnings, never turn a losing year into a tax deduction against other income. Starting with the 2026 tax year, OBBBA makes that already-strict rule meaningfully worse.

The single biggest lever: are you itemizing?

Before anything else, one gate decides whether you can deduct any gambling losses at all: are you itemizing deductions on Schedule A? If not — if you're taking the standard deduction, like most filers — your gambling loss deduction is a hard $0. You owe tax on every dollar of winnings, regardless of how much you lost chasing them. This isn't new for 2026, but it's the foundation everything else builds on.

The new 90% cap

For filers who DO itemize (or professional gamblers, see below), 2025 rules let you deduct 100% of losses, up to your winnings. Starting in 2026, that drops to 90%. The worked example that made this provision famous: win $50,000, lose $50,000 — a real-world break-even year. Pre-2026, you'd report $0 in net gambling income. From 2026 on, you can only deduct $45,000 (90% of $50,000), leaving $5,000 of taxable "phantom income" — tax owed on money you never actually kept. The disallowed 10% doesn't carry forward to a future year; it's simply gone.

Professional gamblers: no longer a workaround

Professional gamblers report winnings and losses as business income and expenses on Schedule C rather than itemizing — historically a meaningful advantage, since pros weren't subject to the recreational gambler's deduction limits and could deduct 100% of losses. That advantage is gone for the 90% question specifically: starting 2026, professional gamblers face the exact same 90% cap as everyone else. "Going professional" changes which form you file on, not how much of your losses you can deduct.

W-2G thresholds: a reporting trigger, not a taxability test

For 2026, slot machines and bingo report at $2,000 (a real increase from the $1,200 figure that had stood since 1977), keno at $1,500, poker tournaments at $5,000, and sports betting at $2,000 — with sports betting carrying a second condition too: the payout must ALSO be at least 300 times the wager, not just clear the dollar figure alone. These numbers only control when the casino or sportsbook has to send the IRS (and you) a W-2G form. They have nothing to do with whether a win is taxable — every dollar you win gambling is taxable income, reported or not.

Casino, poker, sports betting, fantasy sports — all the same rules

None of this is casino-specific. Sports betting payouts, fantasy sports winnings, and poker tournament cashes are all subject to the identical 90% cap, the identical itemizing requirement, and the identical rule that every dollar won is taxable regardless of paperwork.

Political status: contested, not settled

Bipartisan opposition to the 90% cap is real — the FAIR BET Act (House) and FULL HOUSE Act (Senate) would both restore the full 100% deduction. Neither has passed as of this writing, and multiple attempts to fast-track a repeal have been blocked. Plan around the 90% cap as current law, not as something guaranteed to be undone before you file.

Disclaimer

This calculator is for informational planning purposes only and does not constitute tax advice. It does not model illegal- state-gambling loss treatment, which has distinct and unsettled mechanics not covered here. Consult a tax professional for guidance specific to your situation.