2021 Advanced Child Tax Credit

The gambling rules for tax year 2026 have changed due to the new tax bill. One Big Beautiful Bill Act (OBBB), was signed into law on July 4, 2025 by President Trump. These changes will affect both casual gamblers and professionals beginning in the 2026 tax year. Those who gamble should understand the new rules. The Old Rule (Through 2025) Historically, the IRS has allowed taxpayers to deduct gambling losses—but only to the extent of their gambling winnings. If you won $10,000 but lost $15,000, you could deduct $10,000 in losses, effectively zeroing out your taxable gambling income. The New Rule (Starting 2026) Beginning with the 2026 tax year, gambling losses will be deductible at only 90% of the amount of winnings. While this may sound like a minor adjustment, the impact is significant. Example: You win $100,000 and lose $100,000 during the year. Under the old rule: You would report $100,000 of income and deduct $100,000 of losses, resulting in zero taxable gambling income. Under the new rule: You can deduct only $90,000 of those losses on your federal income tax returns. That means you’ll still be taxed on $10,000 of “phantom income,” even though you truly broke even. This rule applies to all gamblers, whether you buy the occasional lottery ticket or operate as a professional gambler. How Itemized Deductions Work It’s important to understand that gambling losses are deductible only if you itemize deductions on your tax return. Here’s what that means: Standard vs. Itemized Deduction Every taxpayer can take the standard deduction—a fixed amount based on filing status. For 2025, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Alternatively, you can choose to itemize deductions if the total of your eligible deductions (mortgage interest, charitable contributions, state and local taxes, medical expenses, and gambling losses, among others) is higher than the standard deduction. Where Gambling Losses Appear Gambling losses are reported on Schedule A, Itemized Deductions, not directly against gambling winnings. You must report all gambling winnings in full as income. Losses are deducted separately on Schedule A, up to the allowable limit (100% through 2025, 90% starting in 2026). Recordkeeping Requirements To claim these deductions, you must keep meticulous records—receipts, tickets, player’s club statements, and a diary of gambling activity. Without proper documentation, the IRS may disallow your deduction even if you had genuine losses. Why It Matters The IRS projects that this change will raise more than $1 billion in revenue over the next decade, but it comes at the expense of fairness. Many taxpayers will now find themselves paying tax on income they never actually earned. Professional gamblers, in particular, may feel the heaviest impact, as their livelihoods often involve large swings of wins and losses. Additionally, because gambling losses are only deductible for those who itemize, some taxpayers may find that the standard deduction provides a bigger benefit—even if it means their gambling losses go unused. This makes strategic planning even more important. Planning Ahead For 2025, the old rules remain in effect. If gambling is part of your financial life, I strongly recommend:  Evaluating whether itemizing makes sense in your situation. Keeping meticulous records of all winnings and losses. Budgeting for higher tax liability in 2026 and beyond, even if you expect to break even. Consulting with a tax professional to explore potential strategies for minimizing the impact. At SBS CPA Group, we’re here to help clients navigate these changes with confidence. If you’d like to review your individual situation and discuss strategies for 2025 and beyond, please reach out to your CPA and we’d be glad to assist. Mike Sylvester, CPA