The 90 % rule on gambling losses, from tax year 2026
Since January 1, 2026, a gambler can deduct only part of the money lost. A year that ends even can now leave taxable income behind.
- Share of losses deductible
- 90 %
- Cap
- the year's winnings
- Applies to
- tax years after 2025
- Law
- Public Law 119-21, sec. 70114
Tax on the 2026 gambling result
$600
Net result $0. Under the 2025 rule the federal tax would have been $0; the 90 % limit adds $600.
| Losses deductible in 2026 (90 %, up to winnings) | $45,000 |
| Losses that no longer count | $5,000 |
| Itemizing beats the standard deduction | yes |
| Federal tax on the gambling | $600 |
| Texas tax on the gambling | $0 |
| Federal tax under the 2025 rule | $0 |
Texas taxes the winnings without the losses in this case. Losses count only for those who itemize; without itemizing, every dollar won is taxed.
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
From the 2026 tax year, section 165(d) of the Internal Revenue Code lets a gambler deduct 90 % of the year's wagering losses, and still no more than the year's winnings. Until 2025 the deduction was the full amount of the losses up to the winnings, so a player who won $50,000 and lost $50,000 paid nothing on the gambling. Under the new rule the same couple, filing jointly with $120,000 of other income and $35,000 of other itemized deductions, deducts $45,000 and is taxed on $5,000 that they never won: $600 of federal tax, against $0 before. The change comes from section 70114 of Public Law 119-21, signed on July 4, 2025. Nothing changes for players who take the standard deduction of $32,200 (joint): they never could deduct losses, and they are still taxed on every dollar won.
Your result under the 2026 rule
Tax on the 2026 gambling result
$600
| Losses deductible in 2026 (90 %, up to winnings) | $45,000 |
| Losses that no longer count | $5,000 |
| Itemizing beats the standard deduction | yes |
| Federal tax on the gambling | $600 |
The words of the new section 165(d)
Congress rewrote the subsection in a few lines. For losses from wagering transactions, the amount allowed as a deduction for a taxable year "shall be equal to 90 percent of the amount of such losses during such taxable year, and shall be allowed only to the extent of the gains from such transactions during such taxable year" (Public Law 119-21, section 70114). The amendment applies "to taxable years beginning after December 31, 2025", so 2025 returns keep the old rule and 2026 returns are the first under the new one. The current text of the Code is at IRC section 165.
Two limits now stack. The first takes 90 % of the losses; the second caps that figure at the winnings. Whichever is smaller is the deduction. A player with modest losses meets the first limit; a player who lost more than they won meets the second, as before, and sees no difference from 2025.
Where the phantom income comes from
The table follows one couple through four years with the same $50,000 of winnings. Only the losses change. The column "never won" is the part of the losses that no longer counts: it is taxed as if it were income, although the couple's bank account never saw it.
| Losses | Deductible 2026 | Never won, still taxed | Federal tax 2026 | Federal tax, 2025 rule |
|---|---|---|---|---|
| $0 | $0 | $0 | $9,420 | $9,420 |
| $25,000 | $22,500 | $2,500 | $4,470 | $3,920 |
| $50,000 | $45,000 | $5,000 | $600 | $0 |
| $80,000 | $50,000 | $0 | $0 | $0 |
The phantom amount is largest when the losses equal the winnings, the break-even year, and it shrinks again once the losses are well above the winnings, because the cap at the winnings takes over. At $80,000 of losses, 90 % of them still exceeds $50,000, so the deduction is the full $50,000 and nothing is taxed that was not won.
Itemizers only, as before
Gambling losses are an "other itemized deduction" on Schedule A. They help only when the itemized total beats the standard deduction, which for 2026 is $16,100 for a single filer and $32,200 for a joint return. Take the same couple without the $35,000 of mortgage interest and state tax: their $45,000 of allowable losses still lift them above the standard deduction, but the first $32,200 of that deduction only replaces the standard deduction they had anyway, so the federal tax on the gambling climbs to $6,884. Gambling winnings tax shows the same mechanism on a smaller win.
Professional gamblers and their expenses
The new text adds that "losses from wagering transactions" include "any deduction otherwise allowable" incurred in carrying on a wagering transaction. Travel, entry fees, software and other costs of a professional gambler therefore fall inside the same 90 % limit and the same cap at the winnings. A professional who wins $400,000 and spends exactly as much in losses and expenses, with no other income, owed $0 under the 2025 rule and owes $4,552 under the 2026 one. Schedule C does not escape the limit.
The IRS has proposed regulations to match: REG-113229-25, published in Internal Revenue Bulletin 2026-19, would amend Treasury Regulation 1.165-10 to the 90 percent figure and adjust the rule that combines the wagering losses of spouses on a joint return. Until they are final, the statute itself governs.
The states do not all follow
State returns start from federal income, but each state chooses how losses enter. Some never allowed them, some allow them only for itemizers or only against certain winnings, and the official sources read for this site do not always say whether the 90 % limit flows through.
| State | Gambling losses on the state return |
|---|---|
| Connecticut | no |
| Wisconsin | no |
| Massachusetts | limited |
| Minnesota | limited |
| Kentucky | limited |
| Oregon | yes, as an itemized deduction |
| Delaware | yes, as an itemized deduction |
| New Jersey | yes, as an itemized deduction |
Connecticut and Wisconsin tax winnings without any deduction for losses, so a break-even player there owes state tax on the full winnings whatever the federal rule. Connecticut and Wisconsin have the details.
Keeping the losses provable
The deduction still depends on records: a log of dates, places, games, amounts won and lost, with tickets, casino win-loss statements and the history of each betting account. The 90 % limit makes those records worth less per dollar, not less necessary. These examples are estimates under the 2026 rules and are not tax advice for any return. A year of losses large enough to matter here is also a reason to look at the free, confidential National Problem Gambling Helpline, 1-800-MY-RESET (NCPG).