Federal tax on 2026 gambling winnings under the new 90% loss rule
Updated October 2026
Section 70114 of P.L. 119-21 rewrote IRC 165(d). The deduction for wagering losses “shall be equal to 90 percent of the amount of such losses” and is “allowed only to the extent of the gains from such transactions.” “Losses” include any other deduction incurred in carrying on wagering, such as a professional gambler’s travel. It applies to taxable years beginning after December 31, 2025.
1. All winnings are income, whether or not you get a W-2G. 2. Deductible losses = the smaller of 90% of losses or winnings. 3. The losses count only as an itemized deduction, so they help only if your itemized total beats the standard deduction. 4. Tax is the difference between your return with and without the gambling.
Worked example. Single, $60,000 of other income, $10,000 of other itemized deductions, $20,000 won and $20,000 lost. Deductible losses are $18,000, itemized deductions $28,000. Taxable income is $80,000 − $28,000 = $52,000, against $43,900 without gambling (when the $16,100 standard deduction was better). The extra $8,100 of taxable income costs $1,132. Under the 2025 rule all $20,000 of losses would have been deductible and the tax $732.
| Game | W-2G issued when (2026) | Before 2026 | Regular 24% withholding |
|---|---|---|---|
| Slot machines, bingo | Winnings of $2,000 or more | $1,200 | None |
| Keno | $2,000 or more after subtracting the wager | $1,500 | None |
| Lotteries, raffles, sweepstakes | $2,000 or more and at least 300 times the wager | $600 | Winnings minus the wager over $5,000 |
| Sports betting, horse and dog racing | $2,000 or more and at least 300 times the wager | $600 | Over $5,000 and at least 300 times the wager |
The IRS Instructions for Forms W-2G and 5754 (revised January 2026) set the minimum reporting threshold for payments made in 2026 at $2,000 and say it will be adjusted for inflation in later years. The 24% rate is regular gambling withholding under section 3402(q); backup withholding at 24% applies instead when a winner does not give a taxpayer ID number. A W-2G is a reporting form, not a tax: winnings below the threshold are just as taxable.
Enter total winnings and total losses for the whole year, not net session results. The IRS expects a log of each session (date, place, game, amounts won and lost) backed by tickets, receipts, statements from the casino or sportsbook and W-2Gs. Online sportsbooks and casino player cards can print a yearly win/loss statement. Withholding goes in the last box so the calculator can show what is still owed.
| Player (single, 2026) | Deductible losses | Federal tax added, 2026 rule | Same year under the 2025 rule | Cost of the 90% limit |
|---|---|---|---|---|
| Break-even weekend player: $20,000 won, $20,000 lost, $10,000 other itemized | $18,000 | $1,132 | $732 | $400 |
| Same player with no other itemized deductions | $18,000 | $3,332 | $2,892 | $440 |
| Occasional player: $3,000 won, $5,000 lost, standard deduction | $3,000 | $360 | $360 | $0 |
| Net winner: $50,000 won, $30,000 lost, $15,000 other itemized | $27,000 | $5,302 | $4,642 | $660 |
| Heavy player: $200,000 won, $210,000 lost, $20,000 other itemized | $189,000 | $2,420 | $0 | $2,420 |
The occasional player never itemizes, so the losses do nothing and all $3,000 is taxed. The heavy player who lost $10,000 overall still deducts only $189,000 against $200,000 of winnings and pays tax on $11,000 of income that does not exist in cash.
The 90% limit also reaches professionals. Their losses and business expenses of carrying on wagering both count as “losses from wagering transactions,” so the total deduction is 90% of the two together, still capped at winnings. The calculator models a casual player who reports winnings on Schedule 1 and losses on Schedule A.
State income tax on winnings (some states do not allow loss deductions at all), the net investment income tax, how winnings raise AGI and so affect Medicare premiums, Social Security taxation and credits, nonresident withholding at 30%, poker tournament reporting, and multi-winner Form 5754 splits.
Netting winnings and losses on one line. Winnings go on Schedule 1 in full and losses on Schedule A. Assuming breaking even means no tax: from 2026 it leaves 10% of losses taxable. Taking the standard deduction and expecting losses to count. Ignoring wins under $2,000 because no W-2G arrived. Treating 24% withholding as the final tax: a filer in the 32% bracket still owes more.