Can You Provide an Analysis of the New Tax Law on Gamblers?

Would you provide an analysis of the impact on a gambler’s tax burden based on the BBB that recently passed in Congress? Rumor has it gamblers can only offset winnings up to 90 percent of losses.

And

Now that the tax bill has been signed into law, what does Bob Dancer think of the 10% rule, making 10% of your “stated” gambling winnings taxable, no matter how much you have lost. For example, if you win $100K, but show losses of $140K, you still have to pay taxes on $10K of gambling winnings. I think that it will be eliminated as a part of a future reconciliation bill in Congress. And it does not start till 2026, I think.

And

If passed, how long will it take to program the slot machines for the new (but still lame) $2,000 lock-up limit versus the current $1,200 limit?What is involved and how much will the change cost? All information appreciated.

These three are just a small sample of the questions we've been getting about the tax reconciliation bill signed into law last month.

A lot of speculation and numbers have been flying around, but the dust seems to have settled a bit around the two tax issues included in the new law.

First, the deduction limit of 90% of losses. From what we can see, no one is disuputing or questioning this provision of the bill. It doesn't apply to everyone, only those who itemize deductions and can claim gambling losses against winnings, rather than taking the standard deduction, on their federal income taxes.

That's not to say it's not impactful or controversial; sports bettors and poker players in particular are decrying this tax on "phantom profits" and many have been talking about leaving the country to ply their trade offshore and/or getting out of the gambling business altogether. The casinos, likewise, are warning that high-limit rooms might be an endangered species. And we've heard the term "double taxation" mentioned, in that the casinos are taxed on 100% of player winnings, while players can claim only 90% of their losses. The 10% of player losses is an overlap.

The devil is in the details, as always, and this policy is so new that the IRS has barely had time to digest it, let alone issue specific guidance to tax preparers and taxpayers.

As for the slot-jackpot reporting threshold supposedly being raised from $1,200 to $2,000, this is the source of a lot of confusion and differing interpretations. As Anthony Curtis writes in this month's newsletter, "It now appears that the increase from $1,200 to $2,000 might apply only to 1099s that are issued for things like contest winners and not affect W-2G issuance, which would leave the current rules for slot jackpots unchanged. No one seems to know."

We'll finish this answer with Anthony's conclusion: "If your head is spinning, take a pause. The good news is that there’s plenty of time for these issues to be clarified, if not amended, as neither will be in place until 2026, meaning next year’s tax filing won’t be subject to either. That is, regardless of how these rules are finally interpreted, they won’t be applicable until the 2027 filing."

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Comments

sunny78 Aug-12-2025

"Crying Over Spilt Milk"

That's the latest blog title from Bob Dancer on the topic here on LVA which I think is most appropriate. Things constantly change in life, for better or worse and somehow, life still goes on and we adapt. Life is a short journey and to obsess over anything in life out of one's control I think is a complete waste of energy.

Time to move on and let the chips fall where they fall I say. Literally and figurately.

Cal Aug-12-2025

The tax issue

I agree with sunny 78. Most of us are recreational gamblers.
Enjoy playing. Of course we play to win, however enjoying the
activity is what really matters. Professional gamblers have concers that hardly affect most of us.

JohnfromtheEast Aug-12-2025

Rushed

If the big beautiful bill had taken the time to be digested, thought through and analyzed, would we be in this quandary?  How many senators and representatives read the 940 pages and understood the ramifications.

grouch Aug-12-2025

real question

how will this new law affect casinos business which also affects taxes the pay to all different jurisdiction state city etc. and how will this affect employees also. 
also read where one casino os going all electronic on games ie craps etc so that means they will not need as many dealers what a world we live in.
but also agree with the others about just gambling for the fun of it

going  to be interesting to see what happens

Paul Aug-12-2025

People are misreading the 90% rule

In many explanations of the 90% deduction rule, people assume they will end up having to pay a "phantom tax" on 10% of their losses.  This is not the case.  You can write off 90% of TOTAL losses against winnings.  As long as you lose over 11% more than your total wins for the year, you can still write off all of your losses up to your winnings.  For example, if you have annual winnings of $1,000, as long as your losses are $1,111.11 or more, you can still write off $1,000 against your winnings of $1,000 and have net zero Federal tax impact.

I think most people are just thinking to add up their W-2Gs and then take 90% of that as losses, which is not correct.  You should keep a session log to substantiate your calculations.

There is a great episode of "Gambling With An Edge" from July 16 with tax attorney Russell Fox where he explains this fully, along with other related topics.

Jeffrey Small Aug-12-2025

I don't think Paul is correct...

I think Paul is interpreting the new law the way we would all like but the interpretation does not appear to be correct.  Currently you can deduct your losses only up to the extent of your winnings.  So will the new law alter that principle?  Paul is saying you can deduct your losses above the amount you win to nullify the effect of the new law. Nice try.  I guess we will have to wait for an official interpretation but no one else has interpreted the new law that way!

Larry Stone Aug-13-2025

big winner?

thank goodness i never win anything so i don't have to worry about the taxes.

Paul Aug-14-2025

Reply to Jeffrey's comment

I am not saying you can deduct losses that are greater than winnings.  I am just saying you can deduct losses that EQUAL your winnings as long as you lose more than 11% of what you win for the year.  Since the vast majority of recreational casino gamblers (i.e., slots, VP, table games) typically lose much more than they win, 90% of their total loss will still likely be at least as much as their total wins, and thus they can have zero Federal tax impact (don't get me started on State's which don't allow deduction for losses!)

Exceptions to this may be professional gamblers, APs, and maybe sports gamblers who are more likely to have net wins over the year than your average Joe.

A key piece of this is defining what a gambling "session" is.  Most gamblers do not have a clue.

Again, listen to this podcast episode with Russell Fox who explains all this:  https://www.youtube.com/watch?v=ZT0JU88mzoE

Question of the Day - 12 August 2025

Comments