Many journalists don’t get gambling. Many journalists also struggle with math. Both are relevant to today’s topic about tax write-offs, so stick with me here.
I see so much confusion about the changes in the One Big Beautiful Bill, especially around the federal tax deduction rules when it comes to gambling losses vs. winnings.
As we shared in our previous reporting on this, there’s two ways it gets presented on social media posts or in write-ups about it:
- The law now says you can only deduct 90 percent of your winnings.
- The law now says you can only deduct 90 percent of your losses against your winnings.
Normally after talking about that, an example is broken out that looks something like this:
If you have $10,000 in winnings and $10,000 in losses, you used to be able to deduct all $10,000. Now you can only deduct $9,000, and the remaining $1,000 is “phantom income.”
OK, cool. But here’s a question for us gamblers: How often do you have a break even or winning year gambling? I know the answer and you all do too. So why is the example so frequently presented about a break-even scenario when that’s not the likeliest outcome?
Well, it’s because it’s easier to do the math and get it right. Perhaps it’s also done with an eye to offering a simple example for readers. But it also creates confusion about what changed, because using the same number on both sides makes for an identical outcome between the two scenarios we listed to start, which is where all the confusion is created.
Here’s a better example that helps to illustrate what actually changed.
You have $10,000 in winnings, and $12,000 in losses. Before you could deduct $10,000 of losses against the winnings, because your deduction is capped at the total amount of your winnings (that part of the rules hasn’t changed).
Now, let’s look at the two examples:
- If the cap is 90% of your winnings, the deductible amount is still $9,000, that $1,000 would still be left over as phantom income.
- If 90% of your losses against the winnings, The $10,800 in losses that can be deducted would still be capped at $10,000, the full amount of your winnings.
Big difference, right? So which is it? Fortunately for all of us, it’s the second.
Important time for a quick note: These deductions are possible only on your federal taxes, and only when you’re itemizing deductions – standard deduction filers don’t get this opportunity. Also, I’m not an accountant, and everybody’s tax scenario will be different, so please consult an accountant well versed in gambling regulations to ensure you file accurately! This article should not be interpreted as professional advice.
Disclaimer aside, who’s really impacted here? Anyone who can gamble for profit (professoinal poker players are a great example of this) will be impacted because now 10% of the losses they can no longer deduct will be added to their income, inflating their income when it comes to federal taxes, and meaning more tax owed.
Players who have a lucky year and have a break even or positive year will also be impacted. It’s important to emphasize that the tax is a percentage of that income, based on your overall income for the year (higher earners paying more), but it’s a tax nonetheless.
But for many of us who tend to lose more than we win over the course of a year, there’s unlikely to be much, if any, change.
I worked in journalism for almost 15 years, and my core job included editing writers for clarity. Math was always fun to work through, and I often had to raise questions about calculations when it literally wasn’t adding up.
I get the $10k/$10k example is an easy one to illustrate, but it also shows that the journalists writing about it don’t really get the scenarios most of us find ourselves in. The example also simplifies it down almost too much; it creates confusion about what changed.
In the process it’s also running the risk of scaring away people from casinos who may not be impacted at all. Maybe that’s on purpose, so the groundswell of support for undoing this change is heard in Congress and eventually it gets reverted.
Some legislators are making attempts to revert the change, although it’s far from assured they’ll succeed. But right now, many gamblers are scared it’s going to impact them, when the reality is most of us won’t see any major changes.
The new rule took effect with the 2026 tax year, meaning we will see the true impacts when it’s time to file them in early 2027. But if you are losing money annually to gambling, the odds are the impact will be either minimal or non-existent.
