Sponsors (6)
The bill clarifies and tightens tax treatment of wagering losses to reduce improper deductions and increase fairness, but that clarity comes at the cost of higher taxes for some gamblers and added compliance and recordkeeping burdens.
Taxpayers who report net wagering income get clearer rules limiting use of wagering losses to offset gains, reducing ambiguity in filings and making reporting more consistent.
The change reduces scope for improper or excessive wagering-related deductions, improving tax fairness for non-gambling taxpayers.
By clarifying the tax treatment now with an effective date in 2026, taxpayers and tax professionals have time to adjust, lowering short-term uncertainty.
Some taxpayers — including recreational bettors and professional gamblers — may no longer be able to deduct wagering losses or related wagering expenses, increasing their taxable income and tax owed.
Applying the clarified limitation across diverse wagering-related deductions could increase compliance and recordkeeping burdens for taxpayers and the IRS.
Based on analysis of 2 sections of legislative text.
Introduced January 8, 2026 by Max Miller · Last progress January 8, 2026
Reinstates and codifies the tax rule that limits deduction of wagering losses so losses can only be deducted to the extent of wagering gains. The rule also clarifies that any deduction otherwise allowable under the tax code that is incurred in carrying on wagering transactions is subject to this limitation. The change takes effect for taxable years beginning after December 31, 2025.