House Panel Advances Bill to Restore Full Gambling Loss Tax Deduction

Legislation to restore the full federal deduction for gambling losses moved a step closer to passage on September 17, after the House Ways and Means Committee approved the measure by a 38-5 vote. The bill would undo part of the 2025 tax law that limits deductions for gambling losses to 90% of the amount lost, a change that can leave some taxpayers owing federal income tax even when they had no net gambling profit.

The committee action does not change the law yet. As The Straight reported, the provision now heads to the full House, and it would still need Senate passage and the president's signature before becoming law.

What Changed

Before the 2025 tax law, taxpayers generally could deduct gambling losses up to the amount of their gambling winnings. That meant a taxpayer with $10,000 of winnings and $10,000 of losses would typically report no net taxable gambling income, although losses could not be used to offset wages, business income or other non-gambling income.

The One Big Beautiful Bill Act, enacted in July 2025, changed that rule for tax years beginning after December 31, 2025, according to The Straight and the Las Vegas Review-Journal. Under the current statute, only 90% of gambling losses are deductible.

The House committee-approved measure, described in coverage by The Straight, The Nevada Globe and the Review-Journal as part of the FULL HOUSE Act effort, would restore the prior 100% treatment for losses against winnings. The Review-Journal also reported that the provision was attached to the Digital Asset Tax Certainty Act before the committee vote.

Who Is Affected

The rule matters most for taxpayers who have large gross winnings and large gross losses in the same year. That can include frequent sports bettors, casino players, poker players and horse-racing bettors, as well as some professional gamblers and high-income recreational gamblers who receive Forms W-2G or otherwise must track substantial wagering activity.

The tax issue is about gross reporting, not net take-home profit. A bettor who breaks even over the course of a year may still have a large amount of winning tickets and a large amount of losing tickets. Under a 90% loss cap, that taxpayer can end up with taxable income on paper despite keeping none of it economically.

The effect can be especially relevant for affluent households because additional taxable income may do more than increase federal income tax on the gambling activity itself. It also may increase adjusted gross income and ripple into other parts of the return, depending on a household's facts. The articles provided do not quantify those downstream effects, so those details remain case-specific.

The After-Tax Math

The basic mechanics are straightforward.

Those examples come directly from the figures described in The Straight and The Nevada Globe. In each case, the taxpayer has no economic profit for the year, but would still report taxable gambling income under current law.

Example: a married couple with high wage income and no net gambling profit records $100,000 of gambling winnings and $100,000 of losses in 2026. Under the 90% rule, only $90,000 of those losses would be deductible, leaving $10,000 of taxable gambling income. At a 37% marginal federal rate, that paper income alone could translate into $3,700 of additional federal tax, before considering any other return-level effects. If Congress restores the 100% deduction before the rule applies, that phantom taxable income would disappear.

That is why supporters have argued the issue is one of taxing money not actually retained. As Rep. Steven Horsford said, according to The Straight, "No one should pay taxes on money they never earned."

Moves to Discuss With Your Advisor

For households that gamble regularly, the immediate issue is documentation. Taxpayers in this situation often consider keeping detailed records of winnings and losses by session or ticket, along with account statements and any tax forms received, because the deduction question matters only if losses can be substantiated.

It may also be worth discussing timing. The current 90% limitation applies to tax years beginning after December 31, 2025, so the first affected federal returns would generally be 2026 returns filed in 2027 unless Congress changes the law first. Households with substantial wagering activity may want to model both outcomes with a CPA: one scenario in which the 90% cap remains in place for 2026, and another in which the pending legislation restores the prior rule.

For business owners and executives whose income already places them in top brackets, even a temporary increase in taxable income can matter. The relevant question is not whether gambling was profitable in net terms, but whether the gross flows create taxable income under the statute in force for the year.

What to Watch Next

The next milestone is a vote by the full House of Representatives. After that, the Senate would need to pass the measure as well. The Review-Journal reported that Nevada Sens. Catherine Cortez Masto and Jackie Rosen have co-sponsored Senate-side legislation with Sen. Ted Cruz, while The Nevada Globe said a Senate companion measure is already in place.

Timing matters. The Review-Journal said Rep. Dina Titus has pushed for action before January 1, 2027, because that is when the 90% rule is set to apply to returns for tax years beginning after the end of 2025. Until a bill is enacted, however, the current law remains the law.

For now, the headline is legislative progress, not final relief. The committee vote was bipartisan and decisive, but taxpayers should treat the restoration of the full deduction as a proposal until Congress sends a bill to the president and it is signed.

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