It is highly probable that for the 2026 tax year, individuals who itemize their federal tax returns will be able to deduct 100% of their gambling losses against their winnings.
The House Ways and Means Committee approved the Digital Asset Tax Certainty Act with a 38-5 vote on Wednesday (Sept. 16). House Resolution 10357 aims to update the federal tax code for the digital asset economy and contains a provision that reinstates the 100% deduction for gambling losses. Previously, this deduction was reduced to 90% under the One Big Beautiful Bill Act (OBBBA) proposed by the Republicans and President Donald Trump.
The gaming industry in Las Vegas and other legal gaming advocates have urged Congress to restore the gambling tax deduction to 100%. They argue that the current 90% deduction cap could force gamblers who win and lose equal amounts to pay federal taxes on unrealized earnings.
IRS Data Highlights Gambling Losses
Representatives from Nevada and other major gaming states such as Pennsylvania have expressed concerns to lawmakers about the potential negative impact of the 90% deduction cap on the legal gaming market. They fear that this change could lead to offshore gambling and harm the domestic industry.
Representative Steven Horsford (D-NV) emphasized the importance of protecting the economy, workers, and small businesses in Nevada. His FULL House Act was included in the Digital Asset Tax Certainty Act.
The gaming industry and its allies argue that not allowing 100% of losses to be deducted against winnings could result in casino closures, job losses, and reduced tax revenue. They believe that the estimated benefit of $1.1 billion to the federal government over eight years is outweighed by the risks to the gaming economy.
What do the figures from the Internal Revenue Service (IRS) reveal?
Recent IRS data for the 2023 tax year showed that only 15.1 million taxpayers filed itemized returns. After the Tax Cuts and Jobs Act of 2017 increased the standard deduction, the percentage of itemized returns dropped from about 30% to 10%.
In 2023, less than 4% of itemized filers took advantage of the gambling loss deduction, impacting less than 0.4% of the total taxpaying population.
Despite the low utilization rate, those who did claim the deduction reported significant losses.
Gambling earnings for 2023 exceeded $50.1 billion, with $42.7 billion in losses deducted. If the 90% cap had been in effect, deductions would have been reduced to around $38.4 billion.
The IRS stipulates that gamblers must accurately record their winnings and losses for itemized deductions and provide supporting documentation in case of an audit.