US Tax Cap Leaves Break-Even Gamblers Owing Tax
Gamblers in the United States can deduct only 90% of their losses against their winnings, a change to Section 165(d) of the tax code introduced by 2025 tax legislation, according to figures reported by AOL.
The cap means a gambler who wins $50,000 and loses $50,000 over the year, breaking even in cash terms, can still be left with $5,000 of taxable income once the deduction is capped.
How The Cap Works In Practice
All reported winnings count as income on a federal return, whether or not the operator sent a tax form. Losses count only if the taxpayer can document them with a gambling diary, account statements, tickets or receipts.
On $50,000 of documented losses, only $45,000 is deductible under the new 90% cap, leaving $5,000 of winnings with no offsetting deduction. Before 2026, losses could be deducted up to the full amount of winnings, so the new cap removes the last 10% of what a gambler could previously claim.
The deduction only applies to taxpayers who itemise on Schedule A. A gambler who takes the standard deduction, $16,100 for single filers in 2026, gets no separate gambling-loss deduction at all.
The Bigger Hit Can Be Social Security
Gambling winnings are added to adjusted gross income before any loss deduction is applied, and that income figure also feeds into whether Social Security benefits get taxed.
The IRS calculates combined income as adjusted gross income plus tax-free interest plus half of benefits received; a single filer sees up to 50% of benefits become taxable once combined income passes $25,000, and up to 85% once it passes $34,000.
For a retiree with $24,000 in annual benefits and no other income, adding $50,000 in reported gambling winnings can push the taxable share of those benefits to the 85% maximum, since the winnings count in full before the loss deduction is applied.
H.R. 10357 would restore full, dollar-for-dollar gambling loss deductions, but it still needs approval from both the House and the Senate before the 2026 tax filing season begins.
A Bill To Reverse The Cap Is Pending
Until it passes, taxpayers who gamble should keep documentation of every win and loss, since the 90% cap applies regardless of whether a bettor's year nets out positive, negative or exactly even.
The House Ways and Means Committee passed H.R. 10357 by a 38-5 vote on September 16, 2026, which would restore the old rule allowing gambling losses to offset winnings dollar for dollar, applying to tax years beginning after December 31, 2025.
The bill still needs full House and Senate approval before the 2026 filing season, and even if it passes, the Social Security effect would remain unchanged, since losses are subtracted on Schedule A only after combined income has already been calculated.
Taxpayers cannot simply report that their losses matched their winnings. A diary with dates, places and amounts, backed by statements, tickets and receipts, is needed to support any deduction, since a casino's year-end statement may not capture activity spread across multiple venues or online platforms.
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