How the One Big Beautiful Bill Could Impact Gamblers

All gambling winnings are treated as taxable income in the U.S. This includes cash prizes and the fair market value of non-cash prizes like vehicles or trips. As such, all winnings must be reported as “other income” on your federal tax return.

For significant winnings, the payer is required to withhold a portion for federal taxes. If your winnings exceed $5,000, 24% is typically withheld, ensuring some of your tax liability is covered upfront.

Deducting Gambling Losses

Under current regulations, gambling losses can be deducted, but only if you itemize your deductions on your tax return.

The stipulation is that these deductions cannot exceed the amount of income you declare from gambling. The new bill would change this calculation, limiting the deductible portion to 90%.

Given these changes, maintaining detailed records of all gambling activities becomes even more critical. This includes receipts, tickets, and any statements that can substantiate your claims for deductions.

Impact on Professional Gamblers

Professional gamblers, who report their income on Schedule C as self-employed individuals, face additional challenges.

The proposed deduction limit would also apply to non-loss expenses such as subscriptions to data services necessary for their business, which are currently taxed differently. Phil Galfond, a professional poker player, has voiced concerns that this amendment “would end professional gambling in the US and hurt casual gamblers.”

The description in the post on Galfond’s X account reads: “This new amendment to the One Big Beautiful Bill Act would end professional gambling in the US and hurt casual gamblers, too. You could pay more in tax than you won. Contact your representative quickly.

Professional poker player Doug Polk is also pushing back. He is calling for the entire poker community to rally against the bill.

Another Polk post on X was directed towards to Texas Representative Chip Roy. In it, Polk said: “Chip, I am in your district. There is a provision in the Senate version that will kill professional gambling. This will negatively impact THOUSANDS of Texans. Please look at this and help remove this senseless provision.”

State and Local Tax Considerations

It’s important to remember that state and local taxes also apply to gambling winnings. But some states are tax free when it comes to jackpots.

Some states may impose tax at the time of the payout, and if you win money in a state different from your residence, you might owe taxes in both states. However, tax credits are typically available to avoid double taxation.

The Legislative Battle Ahead

Congresswoman Dina Titus of Nevada plans to introduce an amendment to strike this provision from the Senate version of the OBBB. This move reflects the concerns of many in the gambling industry who see the new tax rule as potentially devastating.

The proposed changes in the OBBB highlight the complex interaction between gambling, taxation, and legislation.

The next step is that the bill now returns to the House, which passed its own version, not containing the gambling tax rule, in May.

As the bill progresses through Congress, it will be essential for gamblers at all levels to stay informed about the outcome, as it could significantly impact the cost and feasibility of their gambling activities. As always, careful planning and precise record-keeping are vital in navigating these changes.