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The bill simplifies and tightens the tax treatment of wagering losses—making administration and filing clearer for many—but raises taxes for some gamblers and professional wagering operations and requires additional rulemaking to resolve expense qualification questions.
Taxpayers who report gambling gains get a clearer, simpler bright-line rule limiting deductible wagering losses to the amount of their gambling winnings, which reduces ambiguity when filing returns.
IRS and taxpayers may face lower compliance and audit burdens because the bright-line limitation makes wagering-related deductions easier to administer and dispute less often.
Recreational and other gambling taxpayers who previously relied on the 90% special rule will likely see higher taxable income and larger federal tax bills starting in 2026 because losses will be capped at reported winnings.
People who operate professional wagering activities or treat wagering as a trade or business may lose the ability to deduct business-related losses beyond gambling gains, increasing tax liability for those professionals and wagering businesses.
Tax administration will need guidance and potential rulemaking to define which expenses are 'incurred in carrying on' a wagering transaction, creating transitional compliance costs and uncertainty for taxpayers and the IRS.
Based on analysis of 2 sections of legislative text.
Reinstates a rule that wagering losses are deductible only to the extent of wagering gains and treats wagering-related deductions as wagering losses.
Official title: To amend the Internal Revenue Code of 1986 to reinstate the rules for wagering losses.
Introduced January 8, 2026 by Max Miller · Last progress January 8, 2026
Reinstates a long-standing tax rule limiting deductible wagering losses to the amount of wagering gains and clarifies that any other otherwise allowable deductions incurred while carrying on a wagering transaction count as “losses from wagering transactions.” The change removes a prior 90% limitation and special-rule language and applies to tax years beginning after December 31, 2025.