For most people, gambling is simply a form of entertainment. However, taxpayers who regularly gamble or have significant gambling winnings and losses should be aware of an important change taking effect in 2026.
Beginning in 2026, gambling loss deductions will be limited to 90% of qualifying losses. This means that even taxpayers who break even from a gambling standpoint could have taxable gambling income.
Gambling Winnings Are Taxable
Gambling winnings are generally taxable income and must be reported on your tax return. This includes winnings from casinos, lotteries, raffles, sports betting, horse racing, and other wagering activities. Noncash prizes, such as cars or trips, can also be taxable based on their fair market value. You must report your gambling winnings even if you do not receive a Form W-2G. A Form W-2G is issued for certain types and amounts of gambling winnings but not receiving one does not mean the winnings are not taxable.
What’s Changing in 2026
Under the rules in effect through 2025, taxpayers who itemize could generally deduct gambling losses up to the amount of their gambling winnings. Beginning in 2026, the deduction is limited to the lesser of 90% of gambling losses or the amount of gambling winnings.
For example, assume you have $100,000 in gambling winnings and $100,000 in gambling losses during the year. Under the previous rules, you could potentially deduct the full $100,000 of losses against your $100,000 of winnings. Under the new rules, your deductible loss would be limited to $90,000. That leaves $10,000 of taxable gambling income, even though you broke even overall. In other words, your economic results and your tax results may no longer be the same.
Gambling Losses Aren’t Simply Netted Against Winnings
It is also important to understand that gambling winnings and losses are not simply combined and reported as one net amount. Gambling winnings must be reported as income. Qualifying gambling losses are deducted separately, subject to the applicable limitations. For taxpayers who are not professional gamblers, losses are generally an itemized deduction. This distinction becomes even more important under the new 90% limitation.
Keep Good Records
Good recordkeeping is especially important if you regularly participate in gambling activities.
The IRS recommends keeping an accurate record of your gambling winnings and losses, along with supporting documentation such as tickets, receipts, statements, and other records. Your records should show your winnings and losses separately. Don’t rely solely on a Form W-2G or a statement from a casino to determine your overall gambling activity for the year. Keeping your own records throughout the year can make it easier to accurately report your income and document your losses.
Bottom Line
Beginning in 2026, the tax treatment of gambling losses becomes less favorable. A taxpayer who wins and loses the same amount during the year could still have taxable gambling income because only 90% of qualifying losses can be deducted. If you regularly participate in gambling activities, keeping good records and understanding the new rules can help you avoid surprises when it is time to file your tax return.
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