Gamblers are 'screaming from rooftops' over obscure provision in Trump's big bill
The tax deduction change for gamblers is estimated to generate $1 billion for the federal government over the next 10 years, according to the Congressional Budget Office.
- Gamblers now deduct all of their losses against winnings on their taxes but will have that deduction reduced to 90% of losses under the new law.
- Experts say the change could make professional gambling with large amounts wagered and lost in the U.S 'entirely unprofitable.'
- Democratic lawmakers are trying to erase the obscure, two-paragraph provision from the law, but the carefully calibrated bill was approved with entirely Republican votes.
WASHINGTON − What happens in Vegas will be staying more with the IRS from now on.
That’s because of an obscure provision to reduce the tax deduction for gambling losses, which Congress recently approved in President Donald Trump’s top priority second-term legislative package. The provision is projected to raise $1 billion for the government over the next decade.“People are screaming from rooftops about it,” Brett Abarbanel, executive director of the International Gaming Institute at University of Nevada, Las Vegas, told Paste BN. "This was very quickly noticed. I’ll call it uproar."
What does the tax provision for gambling do?
The new law gives the phrase "cutting losses" a whole new meaning. Gamblers currently deduct 100% of their losses from their winnings off their income taxes. But starting Jan. 1, 2026, under the new law, the deduction for losses goes down to 90%.
While that 10% decrease may not sound like much, experts who study the industry say it would cut severely into a gambler’s profits. In some cases, a professional gambler could owe taxes despite losing more than winning in a year.
“Professional and high-stakes poker players, sports bettors and handicappers are about to be taxed out of business,” said Nelson Rose, a law professor emeritus at Whittier Law School. "Either that or they will move their action overseas to foreign jurisdictions that don’t report gambling winnings to the IRS.”
Phil Galfond, a professional poker player, said on social media “what this means in plain English” is that a gambler who wins $100,000 and loses $100,000 in one year will still owe tax on $10,000 of “phantom” income because only $90,000 of the losses will be deductible.
As the numbers ramp up, the implications become more dire for high rollers. A professional who wins $3 million and loses $2.8 million in one year would have earned $200,000 but will be taxed on $480,000.
“You could pay more in tax than you won,” Galfond said on social media July 1.
How many people does the gambling provision affect?
The change in tax law comes amid an explosion in online betting, through the widespread legalization of online sports wagering.
U.S. commercial gaming revenue reached an annual record of nearly $72 billion in 2024, according to the American Gaming Association. It was the fourth straight year of record revenue, up from $66.5 billion in 2023.
The total included nearly $50 billion in revenue at traditional casinos, nearly $14 billion through sports betting and $8.4 billion from online gaming. Online gaming rose from about $2.4 billion the previous year.
Gambling experts say the change in tax law could hurt professional gamblers who deal in razor-thin profit margins but probably not casual bettors.
In 11 states where sports gambling was legalized, people increased their betting from 99 cents to $4.63 per month, according to an academic study by Wayne Taylor, Daniel McCarthy and Kenneth Wilbur. The study found “the vast majority” – 99% of players during a five-year period – deposited less than $20,500 in their accounts.
“For the casual bettor, the direct impact appears negligible,” Taylor, an assistant professor of marketing at Southern Methodist University, told Paste BN. “This volume is unlikely to trigger the need for itemized deductions.”
The chips quickly add up for heavier hitters. The congressional Joint Committee on Taxation estimated the gambling tax provision would generate more than $1 billion over 10 years for the federal government.
Taylor said professional gamblers facing higher taxes “could make professional gambling in the U.S. entirely unprofitable.”
“It could mean paying more in taxes than they actually earn,” Taylor said.
New tax law could send gamblers offshore or to unregulated outlets: experts
A risk to the industry and the governments that regulate it is that gamblers will stop reporting their income or move to gambling sites in other countries, according to industry experts.
Rose said a double-whammy for gamblers is that casinos, sports books and card rooms report big winnings to the IRS through W-2G or 1099 forms, but gamblers might not track their losses as diligently.
“The real risk is pushing high-volume players offshore,” Taylor said.
Another potential beneficiary is the predictions market, which isn’t regulated like gambling. Companies such as Kalshi.com host “trades” about predictions like who might be elected president or whether the head of the Federal Reserve will be replaced.
One of the president’s adult sons, Donald Trump Jr., said he became a strategic adviser to Kalshi in January after trading on the prediction that his father would win the 2024 election while “biased outlets called the race a coin toss.”
“I'm excited to be a part of what they're building,” the younger Trump said on social media Jan. 13.
Some Democratic lawmakers seek to erase provision from GOP bill
Industry lobbyists and Nevada lawmakers are trying to erase the two paragraphs from the nearly 900-page bill. But those prospects are uncertain because Republicans narrowly approved the carefully calibrated bill in the House and Senate, and the president has since signed it into law.
“We look forward to President Trump’s expected signing and will work closely with Congress in the coming months to address the changes to wagering deduction losses and further modernize the tax code,” the American Gaming Association said in a statement July 3.
Reps. Dina Titus, D-Nevada, and Ro Khanna, D-California, introduced legislation July 7 – three days after Trump signed the bill into law – to remove the provision.
“This common-sense legislation will bring fairness back to gaming taxation, making sure that gamblers can fully deduct losses when they report their winnings,” Titus said on social media July 3. “We should be encouraging players to properly report their winnings and wager using legal operators.”