The tax man came for us, degenerates. Starting with the 2026 tax year, gambling losses can only be deducted up to 90% of winnings—meaning if you break even for the year, you still owe taxes on 10% of your gross winnings. Welcome to the era of "phantom income."

The Quick Hit

• What changed: Gambling loss deductions now capped at 90% of winnings
• The damage: Break-even gamblers owe federal taxes on 10% of gross wins
• The silver lining: Slot jackpot tax threshold raised from $1,200 to $2,000
• Why you should care: This affects every bettor who itemizes deductions

How the 90% Cap Works

Here's the brutal math: Let's say you won $50,000 and lost $50,000 gambling in 2026. Net profit: zero. You'd think you owe zero taxes on gambling. Wrong.

Under the old rules, you could deduct 100% of losses against winnings. Break even, owe nothing.

Under the new rules in the "One Big Beautiful Bill," you can only deduct 90% of your winnings. That means:

• Gross winnings: $50,000
• Maximum deduction: $45,000 (90% of $50K)
• Taxable gambling income: $5,000

You owe federal income tax on $5,000 of "profit" you never actually made. At a 24% tax bracket, that's $1,200 in taxes on money that doesn't exist. We warned about this when the bill was being debated, and now it's law.

Who Gets Hit Hardest

The recreational gambler who bets $200 here and there probably won't notice—the standard deduction is often better anyway. The people getting crushed are:

1. Professional or semi-professional sports bettors who churn significant volume
2. High-volume slots and table game players who cycle money repeatedly
3. Poker players with large tournament cashes offset by buy-ins
4. Anyone who tracks and itemizes their gambling activity

If you're a grinder who puts through six figures in action annually, even breaking even means owing thousands in federal taxes.

The $2K Slot Threshold: Good News

Not everything in the tax changes hurts. The threshold for slot machine jackpots that trigger a W-2G form (and the dreaded hand pay) increased from $1,200 to $2,000.

This means:

• Wins under $2,000 on a single spin no longer generate automatic IRS reporting
• No more stopping your session for 15 minutes while the casino processes paperwork on a $1,500 win
• Fewer W-2G forms to track for your tax records

The $1,200 threshold had been unchanged since 1977, so this adjustment for inflation was long overdue. It's a quality-of-life improvement for anyone who plays slots regularly.

Vegas Casinos Lobbied Hard

The casino industry fought tooth and nail to kill the 90% cap, arguing it would drive recreational gamblers away and ultimately reduce tax revenue. The Vegas casinos even sent executives to Congress to make their case. They lost.

The industry's argument was simple: taxing phantom income discourages gambling, which reduces actual gambling revenue, which reduces actual taxes collected. Lawmakers didn't buy it.

What You Can Do

1. Keep meticulous records: Every bet, every win, every loss. You need documentation to claim any deductions.
2. Consider session accounting: The IRS allows you to net wins and losses within a single gambling session. Know the rules.
3. Talk to a tax professional: If you gamble significant amounts, this new rule warrants a conversation with someone who understands gambling taxation.
4. Adjust your volume: If you're a break-even grinder, you might want to reconsider how much action you're putting through.

The Bottom Line

The government found a way to tax money you didn't actually make. For recreational bettors, this probably doesn't change much. For anyone putting serious volume through sportsbooks or casinos, the math just got worse. The $2K slot threshold is nice, but it doesn't offset getting taxed on phantom winnings. Plan accordingly.