Gamblers are out of luck: the One Big Beautiful Bill Act (OBBBA) changes the tax code so that only 90% of gambling losses can offset wins.
Previously, gamblers were able to deduct 100% of their losses from their wins to calculate their overall taxable earnings.
Critics point out that someone who breaks even while gambling will still owe taxes, even though they’ve made no money.
“The OBBBA provision limiting the deduction of gambling losses might cause individuals to owe taxes on imaginary income, incentivizing gamblers succeeding on thin margins to exit the US or participate in illicit markets,” an analysis in a blog post from the Tax Foundation said. “If only a fraction of professional gamers take their bets outside of legal US markets, the effect will be a net loss to tax collections and an increase in illegal activity.”
In theory, this new tax would generate $1.1 billion in revenue over eight years, according to the Joint Committee on Taxation. However, that estimate does not take into account how people’s behavior may change now that this new policy is in place.
On a state level, Connecticut does not allow casual gamblers to deduct losses from taxable winnings in most circumstances.
This bill will also impact online gambling, which is legal in Connecticut. For online betting, 13% of total gross gaming revenue is paid to the state. Since sports betting was legalized in Connecticut, more than $6 billion has been raised in the state, the vast majority of which came from online betting. This has generated more than $475 million in taxes for the state and federal government.
Three bills have been introduced in the House of Representatives and the Senate to restore the 100% loss reduction. These bills are: the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET) Act; the Winnings and Gains Expense Restoration (WAGER) Act; and the Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE) Act. The FAIR BET Act and the FULL HOUSE Act were both bipartisan legislation.
Rep. John Larson and Sen. Chris Murphy could not be reached for questions about the new tax code and proposed legislation to return to the old tax standards. Sen. Richard Blumenthal’s office declined to answer questions, but did say, “Senator Blumenthal remains very focused on his gambling addiction prevention and treatment legislation, including the SAFE Bet Act and the GRIT Act.”
The new tax code on gambling deductions will take effect on Dec. 31, 2025.
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