This article discusses what gamblers need to consider as they engage in gambling activities after the One Big Beautiful Bill Act’s provisions become effective in 2026.
Trump’s One Big Beautiful Bill Act has been officially signed into law. Along with numerous law changes that I identified in a prior Forbes article, one specific provision looms large for the sports gambling industry. Starting in 2026, professional and amateur gamblers alike will only be able to deduct 90% of their losses, resulting in many gamblers, whether they win, lose, or break even, owing taxes on their gambling activities. This article discusses that provision and what gamblers need to consider as they engage in these activities after the One Big Beautiful Bill Act’s provisions become effective in 2026.Current Gambling Tax Laws
The current tax law governing gambling is fairly simple. All bets that result in a win are considered income, and the taxpayer will owe taxes on that win. For example, if someone goes to a blackjack table, bets $100, and wins, that $100 is considered income, and the taxpayer owes taxes on the $20 earned in the same way as someone who goes to work as a barista and earns $100.
However, what is less clear is what happens when the taxpayer wins $100 one day, and has income on that day, but then loses $100 the next day, effectively resulting in the taxpayer having no gain or loss once netted together. The IRS discusses in Topic number 419 that Taxpayers can deduct, as a miscellaneous itemized deduction, any gambling losses to the extent of their wins. This means that taxpayers do not take the standard deduction, increase their income by $100, and increase their deductions by $100, resulting in no tax consequences. Taxpayers who take the standard deduction receive no deductions.The Advent Of Online Gambling
When gambling was primarily conducted in casinos using cash-based transactions, tax laws were more difficult to enforce. For example, when the same person who earned $100 playing blackjack wins $100 and walks out of the casino, there is no clear paper trail connecting them to the $100 win. It is the taxpayer’s responsibility to accurately file their taxes and comply with all applicable state, local, and federal laws. However, unlike the barista, there are no tax forms associated with winning $100, and it is possible (if not probable) that the $100 gambling winnings from that session went unreported.
In 2018, much of this changed as the Supreme Court ruled that states can regulate their own sports betting rules. Sports betting apps like DraftKings, FanDuel, and Underdog have swarmed the market as states slowly roll out legalized gambling environments within their borders.
As I previously discussed in a Poole Thought Leadership article, one key area that has received little attention as this initiative has been rolled out is the tax liability for individuals. In particular, there is now a clear paper trail of the gambling activities for each taxpayer.
