Senate’s Tax Bill Could Force Gamblers to Pay Even When They Lose

While the bill has sparked broader debate over healthcare and spending, this specific provision could reshape the gambling landscape in the U.S. for both casual bettors and professional gamblers alike.

How the 90% Deduction Cap Works

Under current IRS rules, gamblers can deduct their losses up to the amount of their winnings, effectively nullifying tax liability if they break even or incur a net loss. The Senate’s proposal caps this deduction at 90%.

Let’s say a gambler wins $100,000 but loses the entire amount. Today, they owe nothing. Under the Senate’s bill, only $90,000 in losses would be deductible, leaving $10,000 as taxable income—equating to roughly $2,400 in taxes despite zero profit.

Professional players stand to lose even more. In a widely shared example, poker pro Phil Galfond calculated that a high-volume gambler with $5.2 million in winnings and $5 million in losses would be taxed on $700,000—over triple the actual profit.

Industry Impact: Offshore Migration and Revenue Decline

Industry experts warn the proposal could backfire by pushing players to offshore gambling platforms, beyond the reach of U.S. regulations and tax enforcement. This would erode federal and state tax revenues while exposing players to fewer consumer protections.

Recreational gamblers might simply stop playing altogether. Faced with higher tax risks and shrinking rewards, they could turn away from regulated casinos and sportsbooks—especially as states like Illinois are already increasing taxes on operators, prompting surcharges from brands like FanDuel and DraftKings.

What Gamblers Need to Know About Current Tax Law

Gambling winnings—big or small—are considered taxable income in the U.S. Large wins usually come with a W-2G form, but even smaller wins must be reported. You can deduct gambling losses up to the amount of winnings, but no more.

Key rules include:

• You must report all winnings, with or without a W-2G.
• Losses can only offset winnings, not exceed them.
• Professional gamblers may deduct travel and meal costs—but only up to their winnings.
• Detailed recordkeeping is essential: dates, places, amounts, and documentation like receipts and betting slips are required.

What Happens Next?

The Senate passed the bill on July 1 with Vice President JD Vance casting the tie-breaking vote. The House must now review and vote on the Senate’s changes, including the 90% deduction cap.

Negotiations will likely go to a conference committee, where lawmakers from both chambers will iron out the differences. However, President Trump has demanded the bill be finalized by July 4. If the deduction cap survives, American gamblers could soon face a major tax shift—paying Uncle Sam even when they lose.