INSIGHT

New Gambling Loss Deduction Limits: What Las Vegas Taxpayers Need to Know 

February 6, 2026

Services: Tax, Private Client Services

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If you’re among the many Las Vegas residents who gamble (casually or professionally) a recent federal tax law change could significantly impact your 2026 tax liability. The One Big Beautiful Bill Act (OBBBA) has introduced a provision that limits gambling loss deductions to 90% of losses to the extent of gambling winnings, down from the previous 100% offset. This seemingly small adjustment creates substantial tax consequences that could catch many taxpayers off guard. 

How the New Gambling Loss Limitation Works 

Previously, if you won $100,000 in gambling winnings but had $100,000 in gambling losses throughout the year, you could fully offset your winnings and owe no tax on that gambling activity. You essentially broke even, and the tax code treated you accordingly. 

Under the new OBBBA provision, your deductible losses are now capped at 90% of your losses. Using the same example above, you can now only deduct $90,000 of your losses, leaving you with $10,000 in taxable income—even though you didn’t profit from your gambling activity. 

Here’s what this means in practical terms: 

• You could pay tax on up to 10% of your winnings, regardless of whether you came out ahead 
• Break-even gamblers now face tax liability on income they never truly received 
• Winning gamblers see their tax burden increase substantially, even on modest net profits 

The Real-World Impact on Your Tax Bill 

The new limitation creates situations where taxpayers may owe taxes on what the Tax Foundation calls “phantom income.” Let’s look at a few scenarios that illustrate how this affects different types of gamblers: 

Scenario 1: The Break-Even Gambler 

You win $50,000 throughout the year but also lose $50,000 in wagers. Previously, your tax liability would have been $0. Starting in 2026, you can only deduct $45,000 (90%) of your losses, creating $5,000 in taxable income.  

Scenario 2: The Modest Winner 

You win $75,000 and lose $70,000, for a net profit of $5,000. Your deductible losses are now capped at $63,000 (90% of $70,000), creating $12,000 in taxable income. At a 24% tax bracket, you’d owe $2,880 in taxes—leaving you with just $2,120 in actual after-tax winnings from your $5,000 profit. 

Scenario 3: The Professional Gambler 

Example 1 – Professional gamblers face even steeper consequences. Consider a professional with $1 million in winnings and $1 million in wagers (breaking even). Under the new rules, this individual would be limited to $900,000 losses resulting in taxable income of $100,000. They would have a  $37,000 tax liability at the top tax bracket, despite having zero net income from gambling. 

Example 2 – If a professional gambler has $1 million in winnings and $1.1 million in wagers for an overall loss of $100,000, they will still have a tax liability. The $1.1 million loss is limited to 90% and will only provide a $990,000 deduction against winnings, resulting in taxable income of $10,000 and $3,700 in tax liability at the highest rates.  

Why This Change Was Made (and Why it Might Not Last) 

The gambling loss limitation wasn’t necessarily intended as a permanent policy shift. It was largely a procedural response to Senate budget reconciliation rules that required tax provisions to have significant budgetary impact. This means the provision may have been more about legislative process than sound tax policy. 

Recognition of this issue has led to bipartisan efforts to reverse the provision, including the FAIR BET Act in the House and the FULL HOUSE Act in the Senate. However, until such legislation passes, the 90% limitation remains in effect for the 2026 tax year. 

What You Should Do Now 

Given this significant change to gambling income taxation, here are strategic steps you should consider: 

• Review your gambling activity: If you regularly gamble, assess whether you’ll be affected by the new limitation. Even casual gamblers who previously broke even may now face unexpected tax bills. 
• Maintain detailed records: Proper documentation of both your winnings and losses has always been important, but it’s now critical. Keep: 
  • W-2G forms for reportable winnings 
  • Detailed logs of all gambling sessions, including dates, locations, and amounts 
  • Casino statements and records 
  • Receipts and documentation for all wagers 

• Adjust your withholding or estimated payments: If you anticipate significant gambling winnings in 2026, you may need to increase your withholding or make estimated tax payments to avoid underpayment penalties. 
• Consider the timing of your gambling activity: Depending on your situation, you might want to reconsider the frequency or scale of your gambling activity given the new tax treatment. 
• Plan for year-end tax strategies: Work with your tax advisor well before year-end to understand your projected liability and explore any available planning opportunities. 

Understanding state tax implications 

While Nevada doesn’t impose state income tax on gambling winnings, the federal change could affect taxpayers in other states as well. Seven states have legalized online gambling, and nearly every state has commercial or tribal casinos. If you gamble in multiple jurisdictions or are considering relocating, the interplay between federal and state gambling taxation becomes even more complex. 

Looking ahead 

The landscape of gambling taxation is shifting, and what worked for your tax planning in previous years may no longer apply. This change represents one of the most significant alterations to gambling tax treatment in recent years, and its impact extends beyond the casino floor to online betting, poker tournaments, and other forms of wagering activity. 

Whether you’re a casual gambler who enjoys weekend trips to the casino or a professional player who relies on gambling income, understanding how the 90% loss limitation affects your specific situation is critical for accurate tax planning and compliance. 

How BPM can help 

Navigating these new gambling loss deduction limits requires careful planning and precise record-keeping. At BPM, our tax professionals stay current on federal and state tax law changes affecting Las Vegas residents and businesses. We can help you: 

• Assess how the new limitation affects your individual tax situation 
• Develop strategies to minimize your tax liability within the new rules 
• Maintain proper documentation and substantiation for your gambling activity 
• Plan for estimated tax payments to avoid surprises at tax time 
• Evaluate the broader implications for your overall tax and financial planning 

Don’t let unexpected tax liability from the new gambling loss limitation catch you off guard. Contact BPM today to discuss how these changes affect you and to develop a proactive tax strategy for 2026 and beyond.