House tax writers on Sept. 17 advanced legislation that would restore a full federal deduction for gambling losses against gambling winnings. The House Ways and Means Committee voted 38–5 to move the measure forward, according to Nevada Globe, after more than a year of pressure from Nevada lawmakers and gaming interests.
The fight centers on a tax change enacted in July 2025 that reduced the deduction for gambling losses from 100% to 90% of winnings. Supporters of the repeal say that rule can create taxable income even when a bettor breaks even for the year, which is why critics have described it as a tax on “phantom” income.
What Changed
Under the prior rule described by both Nevada Globe and The Sports Geek, a taxpayer with gambling winnings could generally offset those winnings with an equal amount of gambling losses, up to the amount of winnings. The 2025 change cut that offset to 90%.
The bill approved by the committee would reverse that limit and restore a 100% deduction for gambling losses against winnings. Nevada Globe reported that the measure also would head off a further scheduled tightening: the allowable deduction is set to fall to 80% on Jan. 1, 2027 if Congress does not act.
Nevada Globe said the fix was incorporated into the Digital Asset Tax Certainty Act and included provisions associated with the FULL HOUSE Act. The Sports Geek referred to the effort as the FAIR BET Act. In practical terms, both reports describe the same policy objective: undoing the 90% cap and returning to full loss deductibility against winnings.
Who Is Affected
The most direct impact would fall on taxpayers who report gambling winnings and also have documented gambling losses. That can include high-stakes casino players, sports bettors, and professional gamblers, but the issue is not limited to them. The Sports Geek reported that supporters also expect the rule to affect recreational bettors who use regulated sportsbooks and report annual winnings and losses on their tax returns.
For Nevada, the politics are straightforward. Representatives Dina Titus, Steven Horsford, and Susie Lee backed the effort, according to Nevada Globe, reflecting the state’s reliance on casino and tourism activity. The Sports Geek reported that Horsford has argued the tax change could ripple through the broader hospitality economy, affecting workers and small businesses tied to gaming traffic.
The industry is also engaged. The Sports Geek said supporters include MGM Resorts, Caesars Entertainment, Wynn Resorts, the Nevada Resort Association, and the American Gaming Association. Their concern is that a harsher tax treatment in the regulated market may push some betting activity toward offshore or unregulated platforms.
The After-Tax Math
The simplest way to understand the issue is with a break-even year.
Example: A taxpayer has $100,000 of gambling winnings and $100,000 of gambling losses during the year.
| Scenario | Winnings Reported | Loss Deduction Allowed | Taxable Gambling Income |
|---|---|---|---|
| Prior 100% rule | $100,000 | $100,000 | $0 |
| Current 90% cap | $100,000 | $90,000 | $10,000 |
| Scheduled 80% cap on Jan. 1, 2027 | $100,000 | $80,000 | $20,000 |
That is the core complaint. Even though the taxpayer did not come out ahead economically, the current rule can leave part of the winnings exposed to federal income tax. If the scheduled 2027 change takes effect, the mismatch would grow.
For higher-income households, the dollar impact can become meaningful quickly because gambling winnings are reported as income and are taxed at ordinary federal income tax rates. The exact tax cost depends on the taxpayer’s bracket and facts not addressed in these reports, but the table shows why the issue matters: the taxable base can exist even without net profit.
Moves to Discuss With Your Advisor
Until Congress acts, households with substantial gambling activity may want to focus on recordkeeping and year-end tax projections. The current issue is not whether winnings are taxable—they are—but how much documented loss can be used to offset them.
In situations like this, taxpayers often discuss a few practical questions with a CPA or tax preparer:
- How gambling winnings and losses are being tracked across the year.
- Whether estimated tax payments need to reflect taxable gambling income created by the 90% cap.
- How a possible law change before Jan. 1, 2027 could alter planning for frequent bettors or professional gamblers.
For affluent households, this can be more than a niche issue. A taxpayer with large wagering volume, even in a roughly flat year, may see taxable income rise under the cap. That can affect cash flow for quarterly payments and the final April tax bill.
What to Watch Next
The committee vote does not change the law on its own. The next step is a vote by the full House. The Sports Geek reported that Titus is pressing leadership to bring the measure to the floor before Jan. 1, 2027, the date when the deduction limit is currently scheduled to tighten further.
There is also Senate interest. Nevada Globe reported that a companion bill, S. 2230, is backed by Sens. Catherine Cortez Masto and Ted Cruz. That bipartisan pairing may help keep the issue alive, but no final repeal has been enacted yet.
For now, the key question is timing. If Congress moves the bill this year, taxpayers who gamble could avoid a harsher 2027 rule and potentially return to the long-standing 100% offset framework. If the legislation stalls, the 90% cap remains in place, and the scheduled drop to 80% is the next major date to watch.
Sources
- First reported House Ways and Means Advances Nevada-Backed Bill to Kill 'Phantom Income' Tax and Restore 100% Gambling Loss Deductions — Nevada Globe
- House Committee Clears Bill to Restore Gambling Loss Tax Deduction — The Sports Geek
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
