The gambling loss deduction explained

What is the gambling loss deduction?

The gambling loss deduction is the federal tax rule that lets you reduce your taxable gambling winnings by the money you lost wagering in the same year. It lives in section 165(d) of the Internal Revenue Code, and it has one firm ceiling: losses are deductible only up to the amount of your wagering gains for that year.

That ceiling matters more than most players expect. A losing year doesn't create a deduction against your salary, and an unused loss doesn't carry forward to next year. The rule only ever brings your gambling income down toward zero. For the bigger picture on what is taxed, start with our guide to gambling taxes, which sits under the US gambling law hub.

The rule applies to every kind of wager: slots, table games, sports bets, lottery tickets and poker. It applies whether you played in a Las Vegas resort, a state-licensed app in New Jersey or an offshore site. Where you play changes the paperwork you receive, not whether your winnings are taxable.

The 90% gambling loss deduction cap from tax year 2026

The biggest change in decades arrived with the 2025 tax law known as the One Big Beautiful Bill Act, H.R. 1 in the 119th Congress. Section 70114 amends IRC § 165(d) so that, for losses from wagering transactions, the deduction equals 90 percent of those losses, and it still can't exceed your wagering gains for the year.

The change applies to taxable years beginning after December 31, 2025, which means the 2026 tax year, filed in 2027. The amended text also says "losses from wagering transactions" includes any deduction otherwise allowed in connection with conducting a wagering transaction, such as related expenses. That pulls those expenses inside the same 90% cap.

An IRS and Treasury proposed rule published in the Federal Register on April 17, 2026 (opens in a new tab) repeats the same limit: the deduction is limited to 90 percent of wagering losses for the year, and only to the extent of wagering gains. That summary was read through a mirror of the Federal Register page, and no irs.gov page confirming the 90% rule was located, so treat it as reported and check current IRS guidance before you file.

This page explains the law as reported. It isn't tax advice. Your own return depends on your full circumstances, so check the current IRS instructions or speak with a tax professional.

How the 90% cap changes the math

The rule as reported works in two steps: take 90% of your wagering losses for the year, then cap that figure at your wagering winnings. That describes the formula, not your return, so check IRS guidance or a tax professional before applying it to your own figures.

The change that surprised many players is the break-even year. Under the old rule, a player whose losses matched their winnings had nothing taxable from gambling. Under the 90% rule, a tenth of those losses no longer counts, so part of the winnings stays on the return even though the player ended the year with no profit.

Frequent, high-volume players feel this most. Slot and table play turns over money many times, and the house edge means losses pile up over time. When gross winnings and gross losses are both large, the share of losses that no longer counts can add up to real taxable income in a losing or flat year.

The cap still works the old way at the top: you can never deduct more than you won. A big losing year doesn't help you against wages or other income.

Who the 90% gambling loss limit affects most

The cap bites hardest when your winnings and losses are both large and close together. That describes regular slot players, video poker grinders, sports bettors who place hundreds of wagers and poker players with big swings. Occasional players who win a single jackpot and have few recorded losses feel it much less.

• High-volume slot players: every spin is a separate wager, so gross wins and gross losses can both run into five or six figures in a year.
• Bonus clearers: wagering requirements multiply turnover, which multiplies recorded wins and losses. See how quickly turnover grows in our explainer on bonus wagering requirements.
• Jackpot winners with losing years: a $2,000 slot hit that triggers a W-2G still counts in full as a winning, while only 90% of the year's losses offset it.
• Casual players: small, infrequent play may never reach a reporting threshold, but winnings are still income, and the same rule applies.

None of this changes the basic economics of gambling. The house edge means most players lose over time, and the tax rule now adds a small extra cost on top for players who win and lose large amounts. Budgeting for entertainment, not income, is the safer frame. Our gambling budget guide shows one way to set it.

W-2G thresholds and reporting gambling winnings in 2026

Payers report certain winnings to the IRS on Form W-2G. According to the IRS instructions for Forms W-2G and 5754 (opens in a new tab), the minimum reporting threshold for payments made in 2026 is $2,000, adjusted for inflation in later years. The proposed rule in the Federal Register states the same $2,000 figure for bingo, keno and slot winnings for calendar year 2026.

Backup withholding of 24% can also apply if you don't give the payer a correct taxpayer identification number. Our W-2G form explainer covers each box on the form.

A W-2G is a reporting form, not the test of whether you owe tax. Winnings below the threshold, and winnings from a casino that never sends a form, are still taxable federal income. Our answer to whether offshore casinos report to the IRS explains why you shouldn't wait for paperwork to arrive.

How to claim a gambling loss deduction: step by step

The mechanics of where the deduction goes on the return weren't confirmed on an IRS page for this explainer, so the steps below focus on what you control: the numbers and the proof. Use the current IRS form instructions for the exact lines.

1. Add up every gambling winning for the calendar year, including amounts on any W-2G and amounts that never generated a form.
2. Add up every gambling loss for the same year from your records: session logs, casino transaction histories, betting slips and bank or crypto statements.
3. For the 2026 tax year onward, multiply your total losses by 90%, as the amended rule is reported.
4. Compare that figure with your total winnings and take the smaller of the two as your deduction amount.
5. Report your full winnings as income, then claim the deduction where the current IRS instructions say, keeping copies of every record behind both numbers.
6. If your gambling was large or complicated, or you also traded crypto, ask a tax professional to review the return before you file.

Never net wins and losses together in your head and report only the difference. The law treats winnings as income and losses as a separate, limited deduction, and the 90% rule makes that distinction cost real money.

Records that support a gambling loss deduction

A deduction is only as strong as the proof behind it. Online play leaves a digital trail, but casinos can close accounts, change platforms or stop answering, so download and store your own copies as you go. Our guide to keeping gambling records has a template.

Crypto adds a layer. If you fund play with Bitcoin, the value of the coin can move between deposit and withdrawal, which may raise separate tax questions outside the gambling rules. Our Bitcoin banking page covers how those transfers work.

Offshore casinos, state law and the gambling loss deduction

Federal tax applies to gambling winnings regardless of where the wager was placed. That includes offshore casinos, which are licensed, if at all, outside the US and aren't licensed or regulated by any US state. Only New Jersey, Pennsylvania, Michigan, West Virginia, Delaware, Connecticut and Rhode Island license real-money online casinos, as our list of states with legal online casinos explains.

Whether playing at an offshore site is lawful is a separate question decided by the law of the state you're in. The federal UIGEA definitions (opens in a new tab) define unlawful internet gambling by reference to the law where the bet is made. The question is covered in depth in our explainer on offshore casino legality, and the state-by-state hub gives each state's rules.

State income tax treatment of gambling winnings and losses varies, and this page doesn't record each state's rule. Some states follow the federal approach closely and others don't. Check your state revenue department's current guidance, especially in a year with large wins and losses.

Efforts to restore the 100% gambling loss deduction

The 90% cap drew quick pushback. Representative Dina Titus of Nevada offered a House amendment to H.R. 5371 (opens in a new tab) that would replace "90 percent" with "100 percent" for taxable years beginning after December 31, 2025, restoring the full deduction from the start.

Whether that amendment, or any similar fix, became law wasn't found as of October 28, 2026. Until the IRS says otherwise, plan on the 90% rule applying to your 2026 return, and check for updates before you file in 2027.

Gambling loss deduction timeline

For a plain-language companion, see our gambling taxes guide, and if you've had a large win this year, our page on big win taxes covers what to do first.

When losses become a problem, not a deduction

A tax deduction never makes losing money worthwhile, and recording losses for tax shouldn't turn into a reason to keep playing. If you're tracking losses because they've grown beyond your budget, or you're chasing losses to win them back, it's a good moment to pause.

The National Problem Gambling Helpline, run by the National Council on Problem Gambling, is free and confidential around the clock at 1-800-MY-RESET (1-800-697-3738), by call or text, with chat through the NCPG helpline page (opens in a new tab). To know what to expect before you call, read what 1-800-MY-RESET is.

Partner casino offers and your gambling loss deduction

The loss deduction works the same whichever casino you use, so the partner offers below aren't a tax strategy. Both casinos are offshore and aren't licensed or regulated by any US state, so there's no state regulator to complain to and no state-backed protection of balances. Check your state's law before you play. Offers are for players 21+ (18+ where allowed) and terms apply.

Silver Oak Casino: $2,500 Welcome Bonus + 50 Free Spins, via our link (new players, 21+ or 18+ where allowed, terms apply). The casino's own site advertises a different package, a $10,000 welcome bonus as a 100% match on each of the first ten deposits with codes SILVEROAK1 to SILVEROAK10 and no free spins. Its promotion page says 30x playthrough (60x on blackjack and video poker) and no max withdrawal, while its terms say 40x on slots, keno, bingo and scratch cards. Deposits start at $30. Those are the casino's own published terms, and the terms shown at sign-up apply. Read our Silver Oak review for the full picture.

Planet 7 Casino: $2,750 Welcome Bonus + 45 Free Spins, via our link (new players, 21+ or 18+ where allowed, terms apply). Third-party listings report a 200% match with code WELCOME200, 30x (bonus plus deposit) wagering on slots and a $1,000 max cashout, with casino minimums of $30 by card or $5 by Bitcoin Lightning. These weren't confirmed on the casino's own site, so check the terms at sign-up. See our Planet 7 review.

Bonuses are slot-focused. Table games are often excluded or weighted lower, so check the terms. And every dollar wagered to clear a bonus adds to the winnings and losses you'll need to track for tax.

21+ (18+ where allowed). Every casino game has a built-in house edge, so over time you should expect to lose what you stake. Set a budget before you play and stop when it’s gone: responsible gambling tools and free help. Gambling problem? Call or text 1-800-MY-RESET (1-800-697-3738).