If you placed a bet at MGM Grand Detroit, played a hand at FireKeepers, or fired up your sportsbook app during the Lions’ playoff run, here’s a tax change worth putting on your radar. Starting with the 2026 tax year, the rules around deducting gambling losses are getting a haircut, and the math may leave you owing tax on money you never actually won.
One Big Beautiful Bill Act: What Changed
The One Big Beautiful Bill Act (OBBBA), passed in 2025 as part of a broader reconciliation package, introduced a new limit on gambling loss deductions. For years, the rule was straightforward: you could deduct losses up to the amount of your winnings, dollar for dollar, as long as you itemized.
Under the new rule, your gambling loss deduction is capped at the lesser of 90% of your total losses or 100% of your total winnings. Put more simply: you can deduct 90% of your losses, but never more than you actually won. The change applies to taxable years beginning after December 31, 2025, which means it first shows up on the returns you file in early 2027.
The Math, in One Example
Remember, losses are limited to 90% of the loss. An Example: if you had $100,000 of winnings and $200,000 of losses, the 90% loss limitation would be $180,000. Since gambling losses cannot exceed winnings, you would be able to use $100,000 of losses to offset the $100,000 of winnings.
Another example: Imagine you finish the year with $10,000 in winnings and $10,000 in losses. You broke even at the casino. Under the old rule, your $10,000 in losses would fully offset your $10,000 in winnings, and your taxable gambling income would be zero.
Under the 90% rule, you can only deduct $9,000 of those losses. That leaves $1,000 of taxable income on a year where you actually broke even. Depending on your bracket, that phantom $1,000 could cost you a few hundred dollars in federal tax, plus Michigan state tax on top.
Professional Gamblers Get Hit Twice
If gambling is your business rather than your hobby, the news is rougher. Under prior law, professionals could deduct losses up to winnings, plus related business expenses (travel, lodging, tournament entry fees, data subscriptions) without that 90% haircut.
The OBBBA applies the 90% cap to both losses and those related business expenses. So a pro who travels for a tournament series can no longer fully deduct the trip, even when it produces taxable winnings. That’s a structural change worth modeling out before you commit to a heavy 2026 schedule.
Itemizing Is Still Required
One thing did not change: gambling losses remain an itemized deduction reported on Schedule A (Form 1040). If you take the standard deduction, you cannot write off any gambling losses, full stop. Plenty of casual gamblers were already paying tax on 100% of their winnings for that exact reason.
The 90% rule mostly bites taxpayers who itemize and have meaningful gambling activity, which includes a lot of Michigan residents now that online sports betting is fully legal here.
What You Can Do To Plan Ahead
A few planning moves worth thinking about now:
- Keep cleaner records than ever. Win/loss statements, dated session logs, bank statements, and W-2G forms will all matter more under the new rule.
- If you’ve been a borderline itemizer, run the numbers on whether the standard deduction makes more sense for you in 2026.
- If you gamble at a professional level, talk to a CPA about how the cap interacts with your business expense planning, entity structure, and quarterly estimates.
We Speak Both IRS and Sportsbook
Tax law and gambling law each have their own dialect, and this rule sits right at the intersection. Whether you’re a weekend bettor, a Michigan poker player working the Detroit circuit, or a full-time pro, the CPA Nerds are happy to help you plan ahead before phantom income shows up uninvited on your 2026 return. Give us a call at 586-468-0200 or contact us here, and we’ll make sure your nerdy paperwork is in order.
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