Tax deduction for gambling losses limited to 90% of losses

[OnlineAP]

The provision is in the final bill:
?SEC. 70114. EXTENSION AND MODIFICATION OF LIMITATION ON WAGERINGLOSSES.

(a) In General.--Section 165 is amended by striking subsection (d)
and inserting the following:
``(d) Wagering Losses.--
``(1) In general.--For purposes of losses from wagering
transactions, the amount allowed as a deduction for any taxable
year--
``(A) shall be equal to 90 percent of the amount of
such losses during such taxable year, and
``(B) shall be allowed only to the extent of the
gains from such transactions during such taxable year.
``(2) Special rule.--For purposes of paragraph (1), the
term `losses from wagering transactions' includes any deduction
otherwise allowable under this chapter incurred in carrying on
any wagering transaction.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.


I opened my H&R Block tax program and recalculated my tax due for 2024 by simply reducing the total losses for the year by 10%. The new figure for total taxes due increased by $214,121 (Form 1040-SR line 24). That is actually the good news. This assumes that the IRS allows session accounting where the sessions are an entire day at each online property. This is how I have been reporting my income. If each session is the length of a single login, then the session wins and losses would be much higher. If the wins or losses from each individual wager were totaled, the tax bill for 2024 would increase by almost $1M.

So the IRS definitions of a win, a loss, and a session are really critical. Also, I file Schedule C as a business. I report my gambling losses as 'returns and allowances' on Schedule C. The tax program does not know these are gambling losses. The tax program will not automatically reduce the losses by 10%.

I am desperate for accurate expert legal interpretations of the new bill. The articles that I have seen so far have not been written by tax experts, and I don't even think anyone in the Senate has a clue as to the implications of this bill for professional gamblers.

[Midwest Player]

Russel Fox is a tax expert, and he has made some comments about this new law online. He gives it a 25% chance that this new provision will be reversed.

[Midwest Player]

There is also some discussion about this over at Vegas Casino Talk forum.

[OnlineAP]

Russel Fox is a tax expert, and he has made some comments about this new law online. He gives it a 25% chance that this new provision will be reversed.

Congress already scored this tax change and used the extra revenue estimates to make their deficit targets. I don't think it will be easy to vote to reduce revenues from this new sin tax.

I will be glad to give Russell those odds and I will be glad to lose the bet. The online sites have perfect records of my activities, and the IRS could crucify me if I tried to understate my win/loss records. I cannot see how it is worth it for me to continue to conduct business with this new headwind.

I suppose I could go back to being a cash poker player, but the nearest poker room is 90 minutes away.

I will try to find Russell's discussion. He is usually very well informed.

[21forme]

There is also some discussion about this over at Vegas Casino Talk forum.

VCT - tales told by idiots, full of sound and fury, signifying nothing

[Norm]

U.S. Rep. Dina Titus, who chairs the Congressional Gaming Caucus, said Monday she joined Rep. Ro Khanna, California, in bringing forward the FAIR BET Act to restore full tax deductions for gambling losses.

[OnlineAP]

U.S. Rep. Dina Titus, who chairs the Congressional Gaming Caucus, said Monday she joined Rep. Ro Khanna, California, in bringing forward the FAIR BET Act to restore full tax deductions for gambling losses.

I read that the gambling tax code amendment was included in the budget bill by U.S. Sen. Mike Crapo, R-Idaho. The 90% rule was estimated to generate $1.1 billion, but I am not sure if this is per annum. If I have the same tax situation in 2026 as I had last year, I would be on the hook for 0.02% of this $1.1B all by myself. Clearly, successful pro gamblers would shoulder much of this estimated tax burden. I am going to change my behavior so as to avoid subjecting myself to this insane tax hike. Certainly, other pro gamblers will change how they do business or how they report their income.

One of my friends says they are going to claim that the entire year is one session. This is effectively allowing him to offset gambling income with losses at a 100% rate. Since this is clearly against the intent and spirit of the new law, I would be reluctant to hang my hat on this approach. But I am not a tax lawyer.

My only hope is that the FAIR BET Act gets some support.