House Panel Advances Bill to Restore Full Gambling Loss Deduction

On Sept. 16, the House Ways and Means Committee advanced legislation that would undo a pending federal tax change for gamblers. The committee voted 38-5 to move H.R. 10357, a broader tax bill that includes language to repeal the recently enacted rule limiting deductions for gambling losses to 90% while still taxing 100% of winnings, according to Casino Reports.

The issue matters because the 90% cap has not yet taken effect. Under the reports, that provision is scheduled to begin on Jan. 1, 2027, meaning Congress still has time to reverse it. If the repeal becomes law, it would preserve the prior rule allowing taxpayers to deduct 100% of wagering losses up to the amount of wagering winnings, subject to the applicable deduction requirements.

What changed

The tax provision at issue traces back to the One Big Beautiful Bill, which, according to Yogonet, President Donald Trump signed on July 4, 2025. That law reduced the gambling loss deduction from 100% to 90%, creating the possibility that a taxpayer with no net gambling profit could still owe federal income tax on so-called phantom income.

The committee's latest action attached the repeal language to H.R. 10357, the Digital Asset Tax Certainty Act. Casino Reports said the package also contains H.R. 6985, the FULL HOUSE Act, along with other unrelated tax provisions.

Rep. Steven Horsford, a Nevada Democrat and co-sponsor of the FULL HOUSE Act, told the committee the fix would restore the longstanding rule and address cases where taxpayers could be taxed on money they did not actually keep. Rep. Dina Titus, also a Nevada Democrat, has separately pushed similar legislation through the FAIR BET Act.

The repeal is not final. According to both reports, the bill next goes to the House Rules Committee and then would need a vote on the House floor. The Senate would also need to pass legislation, and the president would need to sign the final measure.

Who is affected

The immediate impact would fall on taxpayers who report gambling winnings and losses on their federal returns, including both recreational and professional gamblers described in the reports. Nevada lawmakers have also framed the issue as broader than individual returns because of the state's large gaming industry and related employment.

For affluent households, the main concern is not only frequent casino play. The rule could also matter for taxpayers with large but offsetting wagering activity during the year, where gross winnings and gross losses are both high even if the net result is close to zero.

That distinction is important in tax planning. A limit that allows only 90% of losses to offset 100% of winnings can create taxable income even when there is little or no economic profit. Titus said the purpose of the pending repeal is to stop gamblers from paying tax on "phantom money they never won."

The after-tax math

The reports do not provide IRS worksheet details, but the policy effect can be illustrated with simple round numbers.

Example: assume a taxpayer has $500,000 of gambling winnings and $500,000 of gambling losses for the year.

• Under the prior 100% rule, losses up to the amount of winnings could offset the full $500,000 of winnings. Taxable gambling income would be $0.
• Under a 90% loss deduction cap, the taxpayer could deduct only $450,000 of the $500,000 in losses.
• That leaves $50,000 of taxable gambling income, even though the taxpayer broke even economically.

For a high-income household, that difference could raise federal taxable income materially. The exact tax cost would depend on the household's overall income, filing status and other return items, but the key point is straightforward: the 90% cap can turn break-even wagering into taxable income.

That math helps explain why lawmakers backing the repeal have focused on fairness rather than on creating a new tax break. Their stated goal is to return to the pre-2025 treatment.

Moves to discuss with your advisor

Because the 90% cap is scheduled for Jan. 1, 2027, not immediately, there is still legislative uncertainty. Households with significant wagering activity may want to monitor whether the repeal advances before year-end and discuss how recordkeeping and estimated taxes could be affected if it does not.

Taxpayers in this situation often consider keeping especially careful documentation of winnings and losses while Congress debates a fix. They may also want to ask a CPA how the scheduled 2027 rule could affect projected taxable income if large gross wagering amounts are expected.

For business owners and executives, the issue may be easy to overlook because it sits outside ordinary compensation and portfolio planning. But where gambling activity is meaningful, the difference between a full offset and a 90% offset can alter cash-tax projections.

What to watch

The next procedural step is consideration by the House Rules Committee. Casino Reports said there was no timetable available Wednesday for a House floor vote. The same report said House Speaker Mike Johnson announced the House would adjourn early, postponing votes until after the Nov. 3 midterm elections.

That timing matters because supporters say action is needed before Jan. 1, 2027, when the 90% cap is scheduled to take effect. Even if the House passes the measure, the Senate would still need to act, and any final bill would require presidential approval.

For now, the practical takeaway is that the committee vote was a meaningful step, but not the last one. The existing law still calls for the 90% limitation to begin in 2027 unless Congress changes it first.

After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.