Taxpayers who itemize federal returns may be able to deduct 100% of their gambling losses from winnings for the 2026 tax year.
The House Ways and Means Committee approved the Digital Asset Tax Certainty Act on Wednesday (Sept. 16) by a vote of 38-5.
House Resolution 10357 updates the federal tax system for the digital asset economy, but the bill's 98 pages also contain a provision that brings the deduction for gambling losses back to 100%.
President Donald Trump and the Republican's One Big Beautiful Bill Act (OBBBA) reduced the gambling deduction to 90%.
Since then, Las Vegas and the lawful gambling business have been pressing Congress to reinstate the entire deduction, claiming that the decrease compels a gambler who wins $100,000 but also loses $100,000 to pay federal income taxes on $10,000 in imaginary income.
Lawmakers and the Gaming Industry Rejoice Over the Reinstatement of a Deduction
Lawmakers on Capitol Hill have been warned by delegations from other significant gaming states like Pennsylvania and Nevada's congressional delegation that the 90% deduction cap will have terrible repercussions for the legitimate gambling market and encourage some people to participate in offshore gambling.
"For Nevada, this is about protecting our economy and the workers and small businesses who depend on tourism and gaming. Their livelihoods are at stake,” said Rep. Steven Horsford (D-NV), whose FULL House Act was the provision included in the Digital Asset Tax Certainty Act.
Lawmakers who were closely connected to the gaming industry contended that casinos nationwide would suffer, resulting in closures, job losses, and decreased tax income, if they were not permitted to deduct 100% of losses from winnings.
They argued that the possible $1.1 billion profit to the federal government over eight years was far outweighed by the danger to the gaming industry.
Gambling Deductions Are Highlighted by IRS Data
The latest statistics year, the 2023 tax year, shows that just 15.1 million taxpayers submitted itemized returns, according to IRS data. The number of itemized returns plummeted from approximately 30% of filers to about 10% after the 2017 Tax Cuts and Jobs Act almost doubled the standard deduction.
Less than 4% of itemized returns, or 592,864, according to the IRS, made use of the gambling loss deduction in 2023.
This indicates that less than 0.4% of the taxpaying population was impacted by the gambling deduction, as the federal tax agency processed 153 million individual income tax returns that year.
But the gamblers who took the deduction lost a lot of money.
After deducting $42.7 billion in losses, gross gambling wins for 2023 totaled $50.1 billion. These deductions would have been cut to about $38.4 billion under a 90% restriction.
The IRS mandates that gamblers who itemize deductions maintain a precise record of their winnings and losses and "be able to substantiate such amounts using receipts, tickets, statements, or comparable documentation" in the event that their return is audited.
In the end, even though the IRS statistics indicate that the deduction has an impact on only a small portion of all filers, the result of H.R. 10357 has a disproportionate impact on high-volume gamblers and the overall health of the regulated gaming industry.
