Will the OBBBA gambling deduction change be reversed?

Taxes and gambling don’t always mix well, and the latest change has set off alarm bells across the industry. Buried in the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, was a new 90% cap on deductions for gambling losses. Starting in 2026, even if a gambler breaks even, they could still owe tax because they won’t be able to deduct their full losses against their winnings.

This provision came late in the legislative process and was inserted in the Senate version, which quickly passed by the House on July 3. The Joint Committee on Taxation projects it could raise about $1.1 billion over 10 years. For taxpayers who rely on professional or consistent recreational gambling, the cost could be much higher, potentially creating scenarios where taxes are due on nonexistent profits.

That concern has sparked pushbacks not only from gamblers and casinos, but also from lawmakers in both parties. So, the big question becomes: Will Congress reverse the cap before it takes effect?

Current legislative actions

To understand where things stand, let’s look at the legislative history and political response.

Under the Tax Cuts and Jobs Act (TCJA), gamblers could deduct losses, but only up to their winnings. This meant no one could use gambling as a tax shelter. Importantly, there was no percentage cap. If you won $100,000 and lost $100,000, you could net those out and owe no tax.

The OBBBA changed that. Effective for tax years after Dec. 31, 2025, gamblers can only deduct 90% of their losses. That 10% haircut is what alarms professionals and casual gamblers alike. Imagine winning $100,000 and losing $100,000. Instead of breaking even, you’d report $100,000 of winnings and only $90,000 of losses, leaving $10,000 of phantom taxable income.

Lawmakers from Nevada were the first to raise red flags. At a July 25 Ways and Means Committee hearing in Las Vegas, Chair Jason Smith (R-Mo.) made it clear: there’s bipartisan interest in fixing this. He stressed that both Republicans and Democrats recognize the unfairness and unintended consequences.

Rep. Dina Titus (D-Nev.) quickly introduced the FAIR BET Act (H.R. 4304) on July 7, aiming to restore the full deduction. Her message was blunt: without repeal, gamblers might avoid reporting altogether, or shift to offshore platforms and black-market venues. That would hurt both compliance and state gaming economies.

In the Senate, Catherine Cortez Masto (D-Nev.) introduced a similar bill on July 9. Her proposal was temporarily stalled when Sen. Todd Young (R-Ind.) objected, using the opportunity to try attaching an unrelated amendment benefiting religious colleges. Still, the introduction of companion bills demonstrates coordinated momentum.

The political winds are shifting. Even some Republicans who originally supported OBBBA are reconsidering, recognizing the negative impact on constituents and the gaming industry.

Takeaways

Here’s what this means:

1. Phantom income risk – Taxpayers could owe tax even when they haven’t made a profit. That cuts against a fundamental principle of tax fairness.
2. Compliance concerns – When the rules feel unfair, taxpayers are less likely to comply. That’s exactly what Rep. Titus warned about.
3. Bipartisan momentum – With support from both sides of the aisle, this isn’t just a “Nevada issue.” Members from gaming states and beyond see the problems.
4. Revenue trade-off – While the Joint Committee projected $1.1 billion in revenue, that’s spread over a decade. The broader economic cost to compliance and gaming jurisdictions could outweigh the gain.

The Tax Court won’t decide this one, Congress will. Based on recent statements and legislation introduced, there’s a very real chance the 90% cap could be repealed before it ever takes effect.

Next steps for tax professionals

What should tax professionals do right now?

• Watch for repeal efforts. Bills are already on the table, and given the bipartisan push, repeal could gain traction quickly. Stay tuned to both House and Senate developments.
• Advise clients on timing. The cap doesn’t apply until 2026. That means clients who gamble in 2025 will still use the old rules. If repeal happens, we may never see the 90% limit in practice.
• Prepare scenarios. For professional gamblers or clients with significant gambling activity, run projections under both the 90% cap and full deduction. That way, clients can see the potential difference in tax liability.
• Discuss compliance. Even if clients feel frustrated, remind them that accurate reporting is critical. The worst outcome would be triggering penalties or IRS scrutiny by underreporting winnings.
• Stay flexible. Like many tax law changes, this one could flip quickly. If Congress acts this fall or winter, guidance and implementation updates will follow.

Conclusion

The One Big Beautiful Bill Act might have been signed into law with much fanfare, but the 90% gambling deduction cap tucked inside it is proving unpopular and possibly short-lived. With bipartisan recognition of its flaws, legislative proposals already in motion, and strong voices from gaming states leading the charge, a reversal could happen.

For tax professionals, the key is awareness. Clients may already be asking about this change. Your role is to explain the law as it stands today, acknowledge the uncertainty and show how the proposed repeal could help.

As always, NATP will continue monitoring developments closely. When Congress deals its next hand on gambling deductions, you’ll be the first to know.