Legislation to Restore Gambling Losses Tax Advances
A major headache for American gamblers and the gaming industry cleared a hurdle on Wednesday. The House Ways and Means Committee voted to move forth with legislation that will a portion of the One Big Beautiful Bill Act (OBBBA), which had been in place since July 2025. The vote paves the way to restore the 100% tax deduction for gambling losses, undoing the controversial 90% loss deduction cap from the OBBBA.
The provision was included in H.R. 10357, the Digital Tax Asset Certainty Act, and if approved by the full House and Senator would apply retroactively to the 2026 tax year. The previous policy had threatened to force break-even and small-margin bettors to pay federal income tax on "phantom" profits.
Under longstanding IRS rules, taxpayers who itemize deductions on Schedule A were able to to deduct documented gambling losses up to the full value of their gross winnings in the tax year. For example, if a bettor accumulated $100,000 in payouts but incurred $100,000 in total wagers achieved a net zero balance - and owed no federal income tax. The OBBBA capped that deduction at 90%, meaning you could accumulate $100,000 in gross payouts but only be able to claim $90,000 of your $100,000 in total wagers, forcing a bettor to pay federal income tax on $10,000 of "phantom" income.
The change could have major impacts on losing bettors, too. If one accumulated $150,000 in gross payouts but had $160,000 in total wagers, and could only claim $135,000 of that figure (90% of the $160,000), forcing the to face a $15,000 taxable income despite being down $10,000.
Bipartisan backlash
Immediately upon the signing of the OBBBA, there was backlash from both sides of the aisle. In particular, Rep. Dina Titus (D-NV) was vocal about the need to revert the deduction cap to the original 100%, introducing the FAIR BET Act just days later.
Following the Ways and Means vote, she said: "Finally, after 14 months of uncertainty, my fix to restore the 100% tax deduction for gambling losses has been passed out of committee..."I was the first Member of Congress to recognize this injustice when I introduced my provision to correct it on July 7, 2025."
Momentum grew from there, with Reps. Max Miller (R-OH) and Steven Horsford (D-NV) introducing H.R. 6985, the FULL HOUSE Act, which was the ultimate model for the final provision that was adopted for the vote. Rep. Miller stated, "Americans should not be taxed on money they didn't actually take home. By restoring the full deduction for gambling losses, this bill ensures the IRS treats taxpayers honestly and consistently."
Industry fallout
The gaming industry was immediately concerned about cap. Resort executives, sportsbook operators, horse racing advocates, and poke tournament organizers all spoke about sports bettors and casino bettors curtailing high-volume play to avoid the tax exposure.
At the time, American Bettor's Voice (ABV), a platform that educates and shapes the betting industry, spoke out about the OBBBA and language that could have a detrimental impact on professional gamblers and the broader US gaming industry. ABV board member Adam Robinson said that the proposed change could result in a $1.5 billion annual decline in gross gaming revenue, an $18 billion loss in total betting handle, and a $420 million reduction in state tax revenues. ABV projects New York could lose $129 million annually in taxes, and Illinois about $41 million.
