Break even at the sportsbook or the blackjack table this year, and the IRS may still hand you a tax bill.
That’s the surprise waiting for recreational gamblers in the 2026 tax year, when a new cap kicked in that lets filers deduct only 90% of their wagering losses against their winnings. Push your chips forward $100,000 across the year, pull $100,000 back, and on paper you finished flat. On your Form 1040, you finished up $10,000.
How a Wash Becomes Taxable Income
Gambling winnings have always been reported as ordinary income, line by line. Losses have always been an itemized deduction, and only up to the amount of winnings. What changed this year is the ceiling on that deduction.
Under the new rule, a bettor can only deduct 90% of wagering losses. Report $100,000 in winnings, prove $100,000 in losses, and $90,000 gets subtracted. The last $10,000 is phantom income: money that never stayed in your pocket, taxed as if it did. The phantom figure is always 10% of the losses claimed. Lose more, owe more, even when the scoreboard says you broke even.
Two important caveats. First, this only stings filers who itemize. Anyone taking the standard deduction cannot subtract gambling losses at all and never could, which is a rougher math problem entirely. Second, winnings still hit your adjusted gross income up top, which can ripple into Medicare premiums, Social Security taxation, and state tax bills long after the last hand is dealt.
Congress Keeps Swinging at Repeal and Missing
The provision has been under fire since the day it passed, and every attempt to knock it out has fallen short.
- The FULL HOUSE Act was introduced in January 2026 with backing from Ways and Means lawmakers to restore full deductibility.
- Senators Cruz and Miller filed a companion bill in March 2026 aiming to do the same thing on the Senate side.
- Representative Dina Titus of Nevada has been the loudest voice for repeal. Her amendment fell short on January 23, 2026, and House Republicans blocked another attempt in February 2026.
Then came the hearing. On July 17, 2026, the IRS held an open session on the rule. The speaker list ran from Titus herself to tax professionals including Gary Kondler, gaming industry representatives, and amateur and professional gamblers. The ask was uniform: let losses offset winnings at 100%, the way they used to.
Titus put the industry’s footprint on the record, telling the panel the domestic gaming industry supports 1.8 million jobs, $104 billion in wages and salary, and $53 billion in tax revenue for state and local government. Kondler was blunter about the customer side: “The gambling industry is facing a decline in numbers because of the fear that has set in for many gamblers due to the 90% rule.”
Speakers also floated the session method as an alternative accounting approach, netting wins and losses within a defined gambling session rather than tracking every wager. The problem: the IRS has not defined what counts as a “session,” and state guidance is thin. Rely on it at your own risk.
Why Retirees Should Care More Than Most
For a working filer in her 40s, phantom gambling income is annoying. For a retiree, it can cascade. Higher AGI can pull more of your Social Security into taxable territory, push Medicare Part B and Part D premiums into a higher IRMAA tier two years down the road, and squeeze other income-tested benefits (we mapped the IRMAA surcharges and other Medicare traps in a free guide here). A break-even year at the casino can still be a taxable year on the return.
It also matters whether itemizing pencils out for you at all. If your mortgage is paid off, your state and local taxes are modest, and your charitable giving is routine, you may take the standard deduction anyway, in which case the 90% cap is moot and every dollar of reported winnings is taxable. That’s a different, harsher problem, and one worth naming out loud.
What to Do Before You File
Until Congress delivers a fix, the rule stands. A few housekeeping moves for the rest of 2026:
- Keep contemporaneous win and loss records. Dates, locations, amounts, game type. The IRS has always wanted this; now it matters more.
- Pull year-end win/loss statements from every operator, online and in person. They are not tax documents, but they back up your log.
- Run the itemize-versus-standard math early. If the standard deduction wins, losses don’t help you regardless.
- Sit down with a preparer before you file. This is the kind of calculation worth paying a CPA to review, especially if Social Security, Medicare, or a Roth conversion is in the mix.
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