New Gambling Loss Limits Under the “One Big Beautiful Bill Act”: What Taxpayers Need to Know

This past year brought significant tax changes. While the “One Big Beautiful Bill Act” introduced a number of taxpayer-friendly provisions, it also included some less favorable changes that will begin affecting certain taxpayers—particularly gamblers— in 2026.

The Big Picture: Tax Cuts and Trade-Offs

The new law builds on and extends much of the Tax Cuts and Jobs Act, which was originally passed in 2017. Many provisions were set to expire, and Congress acted to extend or modify them.

Among the widely discussed benefits:

• Expanded or extended tax cuts

• Proposed exclusions for certain types of income (such as tips, overtime, etc.)

• Other taxpayer-friendly provisions

At the same time, Congress passed some offsetting measures—one of which directly impacts gambling losses.

How Gambling Losses Worked Before

Historically, under Internal Revenue Service rules:

• Gambling winnings are fully taxable income

• Gambling losses are deductible only if you itemize deductions

• Losses can only be deducted up to the amount of winnings

Example (Old Rule):

• Winnings: $20,000

• Losses: $20,000

• Deduction allowed: $20,000

• Net taxable gambling income: $0

This worked well for taxpayers who were already itemizing (e.g., homeowners with mortgage interest and property taxes). For others, it was less helpful because they had to give up the standard deduction.

The New Rule (Starting in 2026)

Under the new law, gambling losses are still itemized but capped at 90% of losses, and still limited to winnings.

Example 1 (Equal winnings and losses):

• Winnings: $10,000

• Losses: $10,000

• 90% of losses: $9,000

• Deduction allowed: $9,000

• Taxable income: $1,000

Example 2 (Losses exceed winnings):

• Winnings: $10,000

• Losses: $20,000

• 90% of losses: $18,000

• Deduction limited to winnings: $10,000

• No change from prior law

👉 The impact is most significant when:

• Losses closely match winnings

• Losses are less than winnings to begin with

• You were relying on full offset to eliminate taxable income

Why This Matters

For many casual gamblers, this change may not have a dramatic effect. But for others—especially those with:

• Professional Gamblers

• The very lucky who actually win at the casino

• Tight margins between wins and losses

…it can result in taxable income even when you broke even (or actually lost money overall).

Recordkeeping Is Now More Important Than Ever

Accurate documentation is critical under both old and new rules—but even more so now.

Best practices:

• Use casino loyalty cards (they track play history)

• Keep win/loss statements from casinos

• Save gambling receipts, tickets, and records

• Maintain a log of:

  • Dates

  • Locations

  • Amounts won and lost

Casinos such as Encore Boston Harbor, The Nash and Foxwoods Resort Casino provide player tracking and statements that can be extremely helpful in substantiating losses.

A Massachusetts-Specific Note

Massachusetts has its own quirks when it comes to gambling taxation.

While federal law generally allows offsetting losses against winnings (subject to the rules above), Massachusetts treatment can differ depending on the type and location of gambling activity. This creates planning considerations for taxpayers who gamble across:

• Massachusetts casinos

• Out-of-state casinos

• Lottery systems

The rules are nuanced, and proper reporting matters. Specifically, Massachusetts will allow Massachusetts casino losses to offset Massachusetts casino winnings.  As most of my clients go to The Nash, those losses never count in Massachusetts, and those winnings may never be offset.  Same is true with Foxwoods.  However, Winnings at Encore or any other Massachusetts casino may be offset by losses at Encore or any other Massachusetts casino.

What About Professional Gamblers?

There is a category of “professional gambler” under tax law, but:

• It is rarely recognized by the IRS

• It requires meeting strict criteria (regular, continuous, profit-driven activity)

Even for those who qualify, this new limitation still applies.  As professional gamblers do need to have winning years and tend to win and lose large amounts of money, this law change will be brutal for them.

Bottom Line

• The new law reduces the ability to fully offset gambling winnings with losses

• The change takes effect in 2026

• It primarily affects taxpayers whose losses closely match winnings or are less than winnings

• Documentation is now essential

For most casual gamblers, this may not be a major issue. But for those with significant gambling activity, it can create unexpected taxable income.

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.