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The bill creates a simpler, brighter rule for wagering loss deductions that should reduce filing ambiguity and IRS workload, at the cost of higher taxes for some gamblers—especially those who previously relied on the 90% rule—and reduced deductibility for professional wagering activities, plus short‑term uncertainty as regulators define qualifying expenses.
Taxpayers who report gambling winnings get a clearer, simpler bright‑line rule that limits deductible wagering losses to the amount of their winnings, reducing filing ambiguity and likely lowering IRS audit/compliance workload.
Many gambling taxpayers who previously used the 90% special rule to deduct losses in excess of reported winnings will face higher taxable income and larger tax bills beginning in 2026.
People who run professional wagering activities may lose the ability to deduct other business‑related losses beyond gambling gains, increasing tax liability for professional gamblers and wagering businesses.
The tax administration will need further guidance and potential rulemaking to define which expenses are “incurred in carrying on” a wagering transaction, causing transitional compliance costs and uncertainty for taxpayers and the IRS.
Based on analysis of 2 sections of legislative text.
Limits deduction for wagering losses to the amount of gambling winnings and treats related wagering expenses as part of those losses.
Introduced January 8, 2026 by Max Miller · Last progress January 8, 2026
Reinstates and narrows the tax rule for wagering losses so that taxpayers can deduct gambling losses only up to the amount of their gambling winnings. It also clarifies that other deductions tied to carrying on a wagering activity (for example, expenses incurred in the course of wagering) count as “losses from wagering transactions.” The change applies to taxable years beginning after December 31, 2025.