House Panel Votes to Restore Gambling Loss Deduction

In 2025, a law was passed to charge gamblers 10% tax on gambling gross winnings with no regard for losses. This was a significant blow to the recreational gamblers who are being forced to pay taxes on gains they never really realize. After much criticism, the U.S. House of Representatives appointed a panel to revisit the issue. The law that went into affect was part of President Donald Trump’s One Big Beautiful Bill Act.

In the latter part of September, the U.S. House of Representative voted to advance legislation that would reverse this provision. The bipartisan vote was 38-5 from the committee, helping the legislation to clear its first hurdle. If eventually passed, the legislation would restore the full deduction of gambling losses, offsetting up to the net amount of a taxpayer’s winnings.

This new legislation was part of of a provision to the Digital Asset Tax Certainty Act (H.R. 10357). This is part of a 98-page package that also addresses taxes on cryptocurrency gains.

The fairness of the law in question effectively forces gamblers to pay taxes even after sustaining net losses in a given tax year.

The House is working to get the law reverse as soon as possible. Regardless of when it would get passed, it is intended to be retroactive to the 2026 tax year. Getting this reversing legislation passed before the end of the year would prevent a lot of confusion related to gambling gains or losses incurred in 2026.

Since House Speaker Mike Johnson, R-La. has recessed the House until after the mid-term elections, the matter will have to be immediately addressed when the House comes back into session the second week of November.

In a comment made the the press by Rep. Steven Horsford, D-Nev., he stated:

"No one should pay taxes on money they never earned.”

The Gaming Industry Fully Supports the Reversal

The gaming industry was immediately concerned when the 90% cap on gambling losses was put in place. Their concern revolved around the way the new law would adversely affect gamblers, gaming industry employees, and gaming operators (casino, sportsbooks, etc.). Wynn Resorts CEO Craig Billings applauded the reversing legislation's effort to restore fairness to gamblers who actually incur net losses.

While the 38-5 vote is a good sign for the legislation at hand, passage is not guaranteed. Accorded to the prediction markets, the restoration of the 100% deduction cap is close to a 50/50 proposition. Until this new legislation gets passed, gamblers are warned the the 90% cap will remain in effect until otherwise reverse.

As a reminded, gamblers are required to claim gross gambling winnings of $600 or over. They are then allowed to offset 90% of those gains with losses, leaving the other 10% to be taxed at each gambler's respective tax rate.

As the 2026 tax year draws to a close, casino gamblers, horse players, and sports bettors are urged to continue account for their gross winning and losses until this issue is resolved.