🌟 TL;DR
The One Big Beautiful Bill caps gambling loss deductions at 90%, creating phantom income on the 10% you can't deduct. Pro gamblers get hit even harder. The W-2G slot threshold goes up to $2,000, which is nice, but it doesn't change what you owe. Keep session-level records, plan under current law, and watch Congress for a potential fix.
The Rule That Changes Everything
If you gamble, even occasionally, your taxes just got more complicated.
Starting in 2026, only 90% of your gambling losses are deductible. That means if you win $10,000 and lose $10,000, you can only deduct $9,000.
The remaining $1,000 becomes taxable income.
You broke even in real life. But you owe taxes anyway.
That's what many tax professionals are calling phantom income.
1️⃣ What This Means for You
Here's how the new rule works:
Gambling winnings are always taxable
Losses only offset winnings if you itemize
Only 90% of losses are deductible
Excess losses disappear
No carryforward into future years
If you take the standard deduction, you can't use gambling losses at all.
If you're a professional gambler, it gets worse. Losses plus business expenses still can't exceed gambling income, and the 90% cap now applies to you too.
A bad year is just a bad year. There's no smoothing it out later.
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2⃣ One Small Bright Spot
The W-2G reporting threshold for slot winnings increases from $1,200 to $2,000 in 2026 and will adjust for inflation going forward.
That means fewer forms.
But it doesn't change what you owe. All gambling income is still reportable, whether you receive a W-2G or not.
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🧠 What You Should Do Now
Keep detailed session-level records. Don't rely solely on casino reports.
Track:
Date
Location
Type of wager
Net win or loss per session
Congress may attempt to fix the 90% rule, possibly retroactively. But don't plan on it.
Plan under current law. Protect yourself now.
If you gamble regularly or advise someone who does, this is the time to review your tax strategy. The phantom income problem is real. Good planning is the only way to minimize the damage.
If you want help structuring your taxes properly, our team is here to help.
Till next time,
Mike Jesowshek, CPA
Host of the Small Business Tax Savings Podcast
Founder of TaxElm