New Gambling Loss Limits Under the “One Big Beautiful Bill Act”: What Taxpayers Need to Know
The One Big Beautiful Bill Act, enacted in 2025, made numerous changes to federal tax law. Some were favorable to taxpayers. Others were not.
One change that took effect in 2026 could be particularly painful for gamblers: you may no longer be able to deduct 100% of your gambling losses, even when those losses equal your winnings.
That means it is now possible to break even from gambling and still have taxable gambling income.
For Massachusetts taxpayers, the situation can be even more complicated because Massachusetts has its own rules governing which gambling losses can be deducted.
TL;DR
Beginning in 2026, the federal deduction for gambling losses is generally limited to 90% of wagering losses.
The deduction still cannot exceed your gambling winnings.
If you win $10,000 and lose $10,000, you may generally deduct only $9,000 of those losses federally, potentially leaving $1,000 that is not offset by the wagering-loss deduction.
The change can have an especially significant impact on frequent and professional gamblers.
Massachusetts has separate gambling-loss rules. For nonprofessional gamblers, qualifying losses generally must come from Massachusetts-licensed gambling activities to qualify for the Massachusetts deduction.
Good recordkeeping is more important than ever.
How Gambling Losses Worked Before 2026
Under prior federal law, gambling winnings were taxable, but taxpayers who itemized could generally deduct gambling losses up to the amount of their gambling winnings.
For example:
Winnings: $20,000
Losses: $20,000
Potential gambling-loss deduction: $20,000
The losses could therefore fully offset the winnings for purposes of the federal wagering-loss deduction.
That changed in 2026.
The New 90% Gambling Loss Rule
The One Big Beautiful Bill Act amended Internal Revenue Code § 165(d).
Beginning in 2026, the federal deduction is generally limited to 90% of wagering losses, and the deduction still cannot exceed wagering gains.
Consider someone who wins and loses exactly the same amount during the year:
Example 1: $10,000 Won and $10,000 Lost
Gambling winnings: $10,000
Gambling losses: $10,000
90% of losses: $9,000
Maximum wagering-loss deduction: $9,000
Even though this person broke even economically, $1,000 of the winnings is not offset by the wagering-loss deduction.
In other words, you can lose as much as you win and still face federal income tax from your gambling activity.
Example 2: $10,000 Won and $20,000 Lost
Now consider someone who loses substantially more than they win:
Gambling winnings: $10,000
Gambling losses: $20,000
90% of losses: $18,000
Deduction limited to winnings: $10,000
Because 90% of the losses still exceeds the $10,000 of winnings, the deduction remains limited to $10,000.
The new rule therefore has its greatest impact when a gambler's losses are relatively close to, or less than, the amount of their winnings.
Why the New Rule Matters
Imagine gambling throughout the year and ending up exactly where you started.
You won $100,000 and lost $100,000.
Economically, you made nothing.
Under the new federal rule, however, 90% of $100,000 is $90,000. The remaining $10,000 of winnings would not be offset by the wagering-loss deduction.
The larger the amounts involved, the more significant this problem can become.
That is why this change deserves particular attention from:
Frequent gamblers
Professional gamblers
People who receive substantial W-2G gambling winnings
Gamblers whose annual winnings and losses are close
Massachusetts residents who regularly gamble outside Massachusetts
Massachusetts Gamblers Face Another Problem
Massachusetts has its own rules for deducting gambling losses, and they differ from federal rules.
For nonprofessional gamblers, Massachusetts generally allows qualifying gambling losses to be deducted when they are incurred through certain gambling activities licensed by Massachusetts and the taxpayer also has qualifying winnings during the same calendar year. The deduction cannot exceed qualifying winnings.
This distinction becomes particularly important for Massachusetts residents who cross state lines to gamble.
For example, Encore Boston Harbor is a Massachusetts casino. Losses there may qualify under the Massachusetts gambling-loss deduction rules when the applicable requirements are satisfied.
But Foxwoods Resort Casino is in Connecticut, and The Nash Casino is in New Hampshire. Losses at out-of-state casinos generally do not qualify for the Massachusetts gambling-loss deduction available to nonprofessional gamblers.
That can produce a surprising result for a Massachusetts taxpayer who frequently gambles outside the Commonwealth.
You may have losses that matter for your federal return but do not receive the same treatment on your Massachusetts return.
What About Professional Gamblers?
Professional gamblers have another layer of complexity.
Simply gambling frequently does not automatically make someone a professional gambler for tax purposes. Whether gambling rises to the level of a trade or business depends on the particular facts and circumstances, including the regularity and continuity of the activity and whether it is genuinely pursued for income rather than as a hobby.
The new federal limitation also reaches deductions incurred in carrying on wagering transactions.
This can make the 90% limitation particularly significant for a professional gambler who has very large amounts of both winnings and losses.
A professional gambler could have little economic profit, or even an overall economic loss, while still facing taxable income because the federal tax deduction does not recognize 100% of the wagering losses.
Massachusetts also has specific rules for gambling conducted as a trade or business, so professional gamblers should not assume that the rules applicable to casual gamblers apply to them.
Keep Good Gambling Records
Recordkeeping has always been important for taxpayers claiming gambling losses. Under the new rules, it becomes even more important.
The IRS recommends maintaining an accurate diary or similar record of gambling winnings and losses, together with supporting documentation.
Depending on the type of gambling, useful records may include:
Dates and locations
Amounts won and lost
W-2G forms
Betting tickets and receipts
Casino account statements
Player-card or loyalty-program records
Bank or payment records related to gambling activity
Casino win/loss statements can be useful, but they should be part of your overall documentation rather than the only records you maintain.
This is especially important if you gamble at establishments in different states. A Massachusetts taxpayer may need to distinguish between Massachusetts gambling activity and gambling that occurred in Connecticut, New Hampshire, Nevada, or elsewhere.
The Bottom Line
The federal tax treatment of gambling became less favorable in 2026.
The most important change is simple:
You may no longer be able to deduct 100% of your gambling losses, even when you lost as much money as you won.
The federal deduction is now generally limited to 90% of wagering losses, while still being capped at gambling winnings.
For Massachusetts taxpayers, the situation can be even more complicated because the Commonwealth has separate rules governing which gambling losses qualify for a state deduction.
If you gamble regularly or have substantial gambling winnings and losses, waiting until tax season to figure everything out may make the process much more difficult. Keep accurate records throughout the year and understand how the new rules may affect you.
Need Help? Speak with Attorney Haskell
If you have gambling winnings—or think this new rule could affect you—it’s worth getting ahead of it now.
Attorney Louis S. Haskell works with clients every day on real-world tax situations like this, with a practical and calm approach focused on clear answers.
Call or text: 978-459-8359
You can schedule a consultation to:
Review your specific situation
Make sure your documentation is solid
Plan ahead for the 2026 changes
Avoid unnecessary tax surprises
A short conversation now can save a lot of stress later.