That is not a rounding error or an edge case. It is the arithmetic of a rule that took effect in January, applies to every bet you have placed since, and will land on a return you do not file until 2027. The House Ways and Means Committee voted to kill it on September 16. It is still going to hit you.
You Report All Of Your Wins And Only 90% Of Your Losses
For as long as anyone reading this has been betting, the rule was symmetrical. You reported your winnings as income and deducted your losses against them, up to the amount you won. Finish flat and you owe nothing.
The One Big Beautiful Bill Act, signed July 4, 2025, amended Section 165(d) of the Internal Revenue Code, the provision that lets you write gambling losses off against gambling wins. For tax years beginning after December 31, 2025, the losses you can deduct are capped at the lesser of two numbers: 90% of what you actually lost, or the total of what you won.
You still report 100% of your winnings. You offset 90% of your losses. The missing 10% is income as far as the IRS is concerned, and there is no carryforward, so a loss the cap disallows is simply gone.
None of this touched the return you filed this spring. Tax year 2025 ran on the old rule. The first affected return is your 2026 return, filed in early 2027, which is exactly why this matters in September instead of in April. The bets are being counted now. The things you can still do about it close on December 31.
The IRS consumer page on gambling income, Topic no. 419, still says only that the losses you deduct cannot exceed the winnings you reported, with no mention of the cap, as of its last review in June 2026.
A Break-Even Season Now Costs You Money
Run it on a season. Say you won $100,000 across the year and lost $100,000. You are flat. Under the cap you deduct $90,000, report $10,000 of income, and pay tax on it at your marginal rate.
Scale it and it stops being an annoyance. A bettor with $2 million in winnings and $2 million in losses deducts $1.8 million, reports $200,000, and owes roughly $74,000 in federal tax on a year in which they made nothing at all.
It lands on professionals and recreational players alike, and professionals get an extra problem, because business expenses fold into the same capped pool. Casual players who take the standard deduction are untouched, for the uncomfortable reason that they were never deducting anything to begin with. State treatment varies on top of all of it.
One Number Tells You Whether You Are Exposed
The cap only bites when your losses are less than about 1.11 times your winnings. Above that ratio, your deduction was already limited to your winnings under the old rule and nothing has changed for you. Below it, the gap is phantom income. Divide your year-to-date losses by your year-to-date winnings. If the answer comes in under 1.11, you are in it.
How you count changes the answer, which is the part almost nobody has adjusted for. If every wager is its own transaction, a bettor who cycles $5 million through a book and finishes flat has $5 million of winnings and $5 million of losses, and the haircut costs $500,000 of taxable income. Measure the same activity by session and the gross figures shrink, and the haircut shrinks with them. If you spent August buying and selling NFL team futures, every closed position on the winning side is a reported win, so the churn counts for more than the result.
The Committee Vote Was Real, And It Does Not Help You Yet
On September 16, 2026, the House Ways and Means Committee voted 38 to 5 to restore the full deduction. The language rides on the Digital Asset Tax Certainty Act, H.R. 10357, pushed by Nevada Representatives Dina Titus and Steven Horsford.
Titus put it plainly. The provision would “stop the reduction to 90 percent from taking effect and ensure gamblers across the nation do not pay this tax on phantom money they never won.”
A 38 to 5 committee vote is about as close to consensus as that room gets. It is also not a law. The measure needs a full House vote and a Senate vote, and the House is not expected back until after the November midterms.
What the fight exposes is that taxing gross winnings is a policy choice rather than a fact of nature. Finland, which is building a gambling licensing system from scratch at this exact moment, made the choice in the opposite direction. Under Section 85 of its Income Tax Act, winnings from games lawfully organized inside the European Economic Area are not taxed at all.
Finland Went The Other Way Entirely
There is no deduction to argue about, because there is nothing to deduct against. A Finnish bettor who wins pays nothing, as long as the operator is running lawfully in an EEA state. A Finnish bettor who wins on a site outside the EEA is taxed on the gross and reports it themselves. The entire tax question collapses into one fact: which authority licensed the site.
That makes the licence the only number worth knowing, which is why Finnish comparison sites sort by regulator instead of by bonus. Kasinohai, a Finnish comparison site, groups them by which authority licensed them, and at the time of writing it listed 99 tax-free operators, 56 under the Maltese regulator and 44 under the Estonian tax authority. The page is in Finnish, so the figures read more easily than the argument around them.
The reason that list is about to matter more is that Finland’s new act takes effect July 1, 2027, and it changes which operators count as lawful in relation to the Finnish market. The exemption itself is not being repealed. The boundary around it is being redrawn, which is the same species of quiet reclassification as the 90% cap performed here, with the sign reversed.
What To Do Before December 31
Pull your year-to-date gross winnings and gross losses from every platform you use, and compute them two ways, per wager and per session. The gap between those two numbers is the size of your exposure, and it is the one item on this list you can still move.
Then run the 1.11 test on both figures. If you come in under the line, the rest gets urgent. True up your estimated payments before the January deadline. Fix any accounts or information returns carrying the wrong name while there is still a year left to fix them in. Settle the professional-status question with a preparer before the return is drafted rather than during it.
One thing worth knowing before you ask. Daily fantasy has been treated as wagering. Prediction market event contracts have not been settled at all, and could land as wagering, as capital, or under the futures rules in section 1256, with no IRS guidance and very different outcomes.
Congress may fix this. It may even fix it retroactively. Neither is something to plan around with the House out until after the midterms.
