Short Answer
Under IRC §165(d) you can deduct gambling losses only up to the gambling winnings you report, and a casual gambler can deduct them only by itemizing on Schedule A line 16. Beginning in tax year 2026, the One Big Beautiful Bill Act adds a second cut: only 90 percent of your losses are deductible, even within the winnings cap. A gambler who wins and loses $100,000 used to break even; in 2026 they deduct $90,000 and are taxed on $10,000 of phantom income. Losses never offset wages or other income, and excess losses do not carry forward.
2026 and 2025 Gambling Loss Deduction Parameters
Gambling Loss Deduction — IRC §165(d) Parameters
| Item | Tax Year 2026 | Tax Year 2025 |
|---|
| Losses deductible (% of losses) | 90% (new, OBBBA §70114) | 100% |
| Overall cap | Gambling winnings | Gambling winnings |
| Deduction formula | Lesser of 90% of losses or winnings | Lesser of losses or winnings |
| Wagering expenses (professionals, §165(d)(2)) | Inside the limit | Inside the limit |
| Carryforward of excess losses | None | None |
| Casual gambler reporting | Schedule A line 16 (must itemize) | Schedule A line 16 (must itemize) |
| Professional gambler reporting | Schedule C (no net loss) | Schedule C (no net loss) |
| Winnings reporting | Schedule 1 line 8b (all winnings) | Schedule 1 line 8b (all winnings) |
Section 70114 of the One Big Beautiful Bill Act (P.L. 119-21) amended IRC §165(d) so that, for tax years beginning after December 31, 2025, the deduction for wagering losses equals 90 percent of those losses and remains allowed only to the extent of gambling winnings. The expanded definition of wagering losses that folds in business expenses (§165(d)(2)) was made permanent. Sources: IRC §165(d) and IRS Topic 419.
How the IRC §165(d) Calculation Works
The tool applies the wagering-loss limit the way §165(d) is now written: take 90 percent of losses (for 2026), then cap the result at winnings. For the full rules - casual versus professional treatment, W-2G thresholds, recordkeeping, and state quirks - see the Gambling Loss Deduction Guide.
Step 1: Report All Winnings as Income Confirmed
Every dollar of gambling winnings is taxable and goes on Schedule 1 line 8b (for casual gamblers) or as gross receipts on Schedule C (for professionals), whether or not a Form W-2G was issued. Winnings are never netted against losses on the income side; the loss limit is applied separately.
Step 2: Apply the 90 Percent Loss Limit (2026) Confirmed
For tax year 2026, §165(d) allows a deduction equal to 90 percent of wagering losses. For a professional, this 90 percent also reaches the wagering expenses folded in under §165(d)(2). For 2025 the figure is 100 percent of losses. The disallowed 10 percent does not carry forward.
Step 3: Cap the Deduction at Winnings Confirmed
The deduction is allowed only to the extent of gambling winnings. So the deductible amount is the lesser of (a) 90 percent of losses (100 percent in 2025) or (b) total winnings. If your losses are large relative to winnings, the winnings cap binds first and the 90 percent rule may not change the result.
Step 4: Check the Itemizing Gate (Casual Gamblers) Confirmed
A casual gambler can deduct losses only on Schedule A line 16, which requires itemizing. If you take the standard deduction, your loss deduction is zero and you are taxed on every dollar of winnings. Professionals are not subject to this gate; they deduct on Schedule C.
Step 5: Measure Phantom Income Confirmed
Net taxable gambling income equals winnings minus the deductible amount. Under the 90 percent rule this can be positive even when you broke even, producing phantom income - taxable income with no matching cash. The tool estimates the extra tax at the marginal rate you select.
Frequently Asked Questions
Can I deduct my gambling losses?
You can deduct gambling losses only up to the amount of gambling winnings you report, and only if you itemize on Schedule A (for casual gamblers). All winnings are taxable and reported as income; losses are an itemized deduction on Schedule A line 16, capped at winnings. You can never deduct a net gambling loss against other income. Beginning in tax year 2026, the One Big Beautiful Bill Act adds a second limit under IRC §165(d): only 90 percent of your losses are deductible, even within the winnings cap. If you take the standard deduction, a casual gambler gets no loss deduction at all, so all winnings are fully taxed.
What is the new 90 percent gambling loss limit for 2026?
Section 70114 of the One Big Beautiful Bill Act amended IRC §165(d) so that, for tax years beginning after December 31, 2025, the deduction for wagering losses equals 90 percent of those losses, and is still allowed only to the extent of gambling winnings. The disallowed 10 percent is gone for good; it does not carry forward. The change applies to both casual and professional gamblers. A gambler who wins $100,000 and loses $100,000 used to break even for tax purposes; in 2026 they deduct only $90,000 and are taxed on $10,000 of phantom income they never actually kept.
What is phantom gambling income?
Phantom income is taxable income with no matching cash. Because gambling winnings are taxed in full while losses are limited, you can owe tax even when you broke even or lost money for the year. Under the 2026 90 percent rule, a break-even gambler is taxed on 10 percent of winnings: win $100,000 and lose $100,000, deduct only $90,000, and pay tax on $10,000. For a casual gambler who takes the standard deduction, the phantom income is even larger because none of the losses are deductible.
Do I have to itemize to deduct gambling losses?
Casual gamblers must itemize on Schedule A to deduct any gambling losses; the deduction goes on line 16 as an Other Itemized Deduction, capped at winnings (and 90 percent of losses starting in 2026). If you take the standard deduction, you cannot deduct gambling losses at all, yet you still owe tax on every dollar of winnings. Professional gamblers are different: they report on Schedule C and deduct losses and wagering expenses against winnings without itemizing, though the same 90 percent and winnings limits apply.
How are professional gamblers taxed differently?
A professional gambler who gambles as a trade or business reports winnings and losses on Schedule C rather than Schedule A. Business expenses connected to wagering (travel, entry fees, supplies) are deductible, but under §165(d)(2) those expenses are folded into the wagering-loss limit, so total deductions cannot exceed winnings and, beginning in 2026, are capped at 90 percent of losses plus expenses. A professional can never report a net gambling loss. Net gambling income for a professional is also subject to self-employment tax, which this calculator does not compute.
Where do gambling winnings and losses go on my tax return?
Casual gamblers report all winnings as Other Income on Schedule 1 (Form 1040), line 8b, whether or not a Form W-2G was issued. Losses, if you itemize, go on Schedule A line 16 as an Other Itemized Deduction, limited to winnings (and 90 percent of losses for 2026). Professional gamblers report winnings as gross receipts and losses and expenses on Schedule C. Keep a contemporaneous diary plus receipts, tickets, and statements; the IRS can deny an unsubstantiated loss deduction entirely.
Can gambling losses offset other income?
No. Gambling losses can offset only gambling winnings, never wages, business income, or investment income. The deduction is capped at the winnings you report, so the best you can do is reduce your gambling income to zero (for 2025) or to 10 percent of winnings (for 2026 under the new 90 percent rule). Excess losses do not carry forward to future years. This is why a losing year can still produce a tax bill.
Does the 90 percent limit apply to casual and professional gamblers?
Yes. The 2026 amendment to IRC §165(d) contains no exception for professional gamblers. Beginning in tax year 2026, both casual gamblers (on Schedule A) and professional gamblers (on Schedule C) can deduct only 90 percent of their wagering losses, and for professionals that 90 percent cap also reaches the business expenses connected to wagering under §165(d)(2). The limit applies before the winnings cap, so the deduction is the lesser of 90 percent of losses or total winnings.
Will the 90 percent gambling loss limit be repealed?
It is possible but not certain. The 90 percent limit was added to satisfy budget rules in the 2025 reconciliation bill, and several bipartisan bills have been introduced to restore the full 100 percent deduction before it takes effect for the 2026 tax year. As of now the law stands: for tax years beginning after December 31, 2025, only 90 percent of wagering losses are deductible. Plan around the rule as written, and watch for legislation that could reverse it. This calculator lets you compare the 2025 and 2026 results side by side.