Tax Implications for Gamblers: Navigating the New Rules in the Big Beautiful Bill
The recent tax provision hidden within the Trump’s Big Beautiful Bill has implications for gamblers, limiting their ability to offset losses against their winnings. Under the new rule, only 90% of wagering losses are deductible, up to the amount of winnings. This change could impact sports bettors during events like March Madness and the NBA Playoffs in 2026.
According to Cato Director of Tax Policy Studies Adam N. Michel, this tax code adjustment highlights a broader issue with the tax system. Previously, gamblers could deduct losses against winnings, ensuring they were taxed on their net income rather than gross receipts. However, with the new provision, a gambler who breaks even for the year may still owe taxes on income they never actually earned.
For instance, if a person wins $10,000 on the Super Bowl but subsequently loses $10,000 on other bets, they would only be able to claim $9,000 in losses. This would result in a tax bill for the remaining $1,000 in winnings that weren’t offset by losses. The delayed, capped, or denied loss deductions can lead to an overstatement of taxable income, penalizing the risk-taking that generates income.
To navigate these changes, gamblers are advised to maintain a log of their winnings and losses throughout the year. TurboTax recommends declaring losses separately from winnings, ensuring that claimed losses do not exceed reported winnings. Tax firm RJS Law cautions against frequent casino visits from a tax planning perspective, as the new tax provision could tax gamblers on gains that were not realized.
In conclusion, the tax provision in the Big Beautiful Bill introduces limitations on gamblers' ability to deduct losses, potentially impacting their tax liabilities. It underscores the importance of careful record-keeping and tax planning for individuals engaged in gambling activities.