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Federal Tax Deduction for Gambling Losses Nears Full Restoration: What You Need to Know

By jili tutorial · September 16, 2026

Federal Tax Deduction for Gambling Losses Nears Full Restoration: What You Need to Know

The odds of gamblers being allowed to write off 100% of their gambling losses against their winnings have improved significantly this week. A proposal to eliminate the 90% limitation on the deduction for wagering losses has been included in a legislative package currently under consideration by the House Ways and Means Committee. This development marks a potential reversal of a tax rule change enacted by Senate Republicans last year, and it carries major implications for recreational gamblers, professional bettors, and state economies that rely on gaming revenue.

Background: The Gambling Loss Deduction and Its Recent 90% Limit

How the Deduction Works

Under U.S. federal tax law, gambling winnings are considered taxable income. However, taxpayers who itemize deductions can offset those winnings by deducting their gambling losses—but only up to the amount of their winnings. This means you cannot use gambling losses to reduce other income; the deduction is limited to the extent of your gambling gains for the year.

For example, if you won $10,000 from sports betting but incurred $15,000 in losses, you could deduct only $10,000 in losses, leaving your taxable gambling income at $0. The extra $5,000 in losses provides no tax benefit.

The 90% Limitation That Changed Everything

In 2024, Senate Republicans enacted a provision that reduced the deductible percentage of gambling losses from 100% to 90%. Under this current rule, if you have $10,000 in winnings and $12,000 in losses, you can deduct only $9,000 (90% of $10,000). That leaves $1,000 in taxable gambling income, even though you actually lost money overall. This change was widely criticized by gaming industry stakeholders and lawmakers from states like Nevada, where tourism and gaming are economic pillars.

The rationale behind the 90% limit was to curb perceived abuse and raise revenue. However, critics argue it penalizes honest taxpayers who lose money gambling, forcing them to pay tax on “phantom income” they never actually earned.

The Proposal: Restoring 100% Deduction via the Digital Asset Tax Certainty Act

Details from House Resolution 10357

The push to restore the full deduction is embedded in House Resolution 10357, titled the Digital Asset Tax Certainty Act. On page 95 of the 98-page legislative package, the specific language reads:

“The proposal eliminates the 90% limitation on the deduction for losses from wagering transactions. Accordingly, for taxable years beginning after December 31, 2025, losses sustained during the taxable year on wagering transactions are allowed as a deduction to the full extent of the gains during the taxable year from such transactions.”

Key points from the text:

Why It’s Attached to a Digital Assets Bill

The Ways and Means Committee is considering multiple tax-related bills simultaneously, including measures for crypto reporting, health care, and other tax policies. Placing the gambling loss deduction revision inside the Digital Asset Tax Certainty Act is a strategic move—it allows the provision to ride on the coattails of legislation that has broader bipartisan support. This is a common tactic in Congress to advance smaller or more niche proposals.

Legislative Pathway: Ways and Means Committee Action

The Committee’s Role

The House Ways and Means Committee is the oldest committee in the U.S. Congress and the chief tax-writing body. It is currently meeting on Capitol Hill to debate and vote on a package of tax-related bills, including HR 10357. The committee’s consideration of the gambling deduction restoration is scheduled for Wednesday, September 16 (the article’s date context—this week’s session).

If the committee approves the package, it will move to the full House of Representatives for a vote. From there, it would need Senate approval and the President’s signature to become law.

Timeline and Odds of Passage

Key Sponsors and Political Support

The FULL HOUSE Act

The specific gambling loss deduction restoration language is derived from the FULL HOUSE Act (Facilitating Useful Loss Limitations to Help Our Unique Service Economy). This bill was introduced in January by Rep. Max Miller (R-OH) and is cosponsored by a bipartisan group of six lawmakers, including four Democrats and two Republicans.

Notably, two Nevada Democrats—Reps. Steven Horsford and Susie Lee—are cosponsors. Horsford celebrated the provision’s inclusion in the Digital Asset Tax Certainty Act, stating:

“People should not pay taxes on money they never earned. That’s why I introduced the bipartisan FULL HOUSE Act and have worked for months to secure a full repeal of the unfair gambling tax that Senate Republicans enacted last year. For Nevada, this is about protecting our economy and the workers and small businesses who depend on tourism and gaming. Their livelihoods are at stake.”

The FAIR BET Act

Another similar bill, the FAIR BET Act (Fair Accounting for Income Realized from Betting Earnings Taxation), was authored by Rep. Dina Titus (D-NV). She also welcomed the Ways and Means Committee’s inclusion of the deduction revision, saying:

“Very pleased to see that my gambling loss tax deduction fix has finally been included in a tax package. I encourage my Ways and Means colleagues to push it through this week as quickly as possible.”

The bipartisan support—from both Republicans and Democrats, and from lawmakers in gaming states like Nevada, Ohio, and others—signals a broad coalition that may improve the bill’s chances.

What This Means for Taxpayers: Examples and Calculations

Scenario Under Current 90% Limit

Scenario Under Proposed 100% Deduction

Who Benefits Most?

Prediction Markets: Odds of Passage

Prediction markets have already begun trading contracts on whether the gambling loss deduction will be restored to 100%. According to the data:

This 48% probability reflects moderate optimism—better than even odds but far from certain. The market will likely shift as the Ways and Means Committee votes and the bill progresses through Congress. For context, prediction markets often price in political hurdles, committee dynamics, and potential amendments.

Conclusion

The inclusion of the gambling loss deduction restoration in a formal legislative package marks a major step forward for gamblers and the gaming industry. If enacted, taxpayers would no longer be penalized for losing money gambling—they could deduct losses dollar-for-dollar against winnings, starting from the 2026 tax year. With bipartisan support and attachment to a broader digital assets bill, the proposal has a credible path to becoming law, though the 48% prediction market odds show the outcome is far from guaranteed. For now, gamblers and tax professionals should watch the Ways and Means Committee vote on September 16 closely.