You Make the Call - June 25, 2026

Question: John Miller, a retired engineer, enjoys sports betting and casino gambling. During 2026, John received Forms W-2G, Certain Gambling Winnings, reporting $75,000 of gambling winnings. He also maintains a detailed gambling diary and supporting records showing $75,000 of gambling losses. 

John asks his tax professional, Sarah Jones, EA, whether he can deduct all $75,000 of his gambling losses since he has records proving the losses and the losses equal his winnings. 

Can John deduct the entire $75,000 of gambling losses on his 2026 Form 1040, U.S. Individual Income Tax Return? 

Answer: No. Although John has properly substantiated $75,000 of gambling losses, the deduction is limited by the changes made under the One Big Beautiful Bill Act (OBBBA). As a result, a taxpayer may owe tax on gambling income despite having no actual economic gain from gambling activities. 

Before 2026, §165(d) generally allowed taxpayers to deduct gambling losses up to the amount of gambling winnings. Under those rules, John could have deducted the full $75,000 of losses against his $75,000 of winnings, resulting in zero net gambling income. 

Beginning with tax years after Dec. 31, 2025, OBBBA amended §165(d) to limit the deduction for wagering losses to 90% of the taxpayer's wagering losses, then by gambling winnings. 

As a result, John's allowable deduction is: 

• Gambling losses: $75,000 
• 90% limitation: $67,500 
• Allowable deduction: $67,500 

John must report the full $75,000 of gambling winnings as income on Form 1040, Schedule 1, Additional Income and Adjustments to Income, Line 8b. Because only $67,500 of losses are deductible, he will have $7,500 of taxable gambling income, even though his winnings and losses were equal. His $67,500 gambling losses will still be reported on Form 1040, Schedule A, Itemized Deductions, Line 16, Other Itemized Deductions.