By Jasmine Li

WASHINGTON -- An under-the-radar addition to President Trump's sprawling tax-and-spending bill signed into law last week has high rollers crying "no fair" -- and some lawmakers are trying to reverse the change.

Under prior law, taxpayers could deduct gambling losses up to the extent of their winnings from their taxable income. A provision tucked into the new tax law advanced by the Republicans lowers that amount to 90%, starting in 2026, sparking outrage from gamblers and Nevada lawmakers working to defend the industry and its patrons.

"No one should have to pay taxes on money they didn't win," said Rep. Dina Titus (D., Nev), who represents Las Vegas and has introduced a bill to restore and permanently extend the 100% loss deduction, with Republican support.

For gamblers, the change means they could owe more taxes if they lose money or win by slim margins. Larry Campagna, a tax attorney at Chamberlain Hrdlicka, described a scenario where a gambler wins $1 million and loses $1 million, breaking even.

"Under prior law, those would have offset each other and you'd have zero tax to pay because you have zero net income from gambling," he said. But under the new law, the taxpayer would only get to deduct $900,000 of the losses, meaning the person would owe tax on $100,000 -- even though they didn't have $100,000 worth of gains.

The change to loss deductions could have major implications for the finances of high rollers and professional gamblers.

Rufus Peabody, a professional sports bettor based in Las Vegas, estimated that a typical pro gambler sees returns of "a few percent at most" per dollar risked.

"More likely than not, I would owe more money in taxes than I actually made in 2026 if I continue betting," Peabody said. "And so, as it stands, it becomes untenable to be a professional gambler."

A spokeswoman for the American Gaming Association said the trade group, whose members include DraftKings and Wynn Resorts, would support Titus's proposal. The organization previously advocated for extending the 100% loss deduction and expanding it to non-itemizing taxpayers.

While gambling winnings are taxed at regular income rates, taxpayers can deduct their losses if they itemize their deductions and keep records of their wins and losses. For the 2022 tax year, taxpayers filed 2.3 million tax returns reporting gambling earnings, and about 660,000 that included gambling loss deductions, according to Internal Revenue Service data.

While the GOP's megabill broadly extends tax breaks while cutting benefit programs, aspects that generated wide attention and vigorous debate, many smaller provisions went little noticed. In both chambers, the bill text was revised by Republican leaders shortly before passage.

The House initially proposed making permanent the 100% deduction for gambling losses, which was set to expire at the start of 2026. The Senate revised it to 90%.

The change was made to comply with Senate rules requiring provisions to have a budgetary effect to use the filibuster-proof budget reconciliation process, said Mandi Critchfield, communications director for Senate Finance Chairman Mike Crapo (R., Idaho). Republicans used that process to pass the Trump tax bill with no Democratic support.

Because Republicans were using a baseline that assumed expiring tax cuts were extended, each provision had to be changed. The standard deduction, alternative minimum tax parameters and tax brackets all had relatively small changes from a straight extension.

"In order to retain the gambling loss provision, it was changed to 90%," Critchfield said. "While the committee heard from gaming associations on other provisions after text was released on June 16, there were no concerns raised with lowering the threshold."

Lowering the limit to 90% would raise about $1 billion through 2034 compared with an extension of the prior deduction limit, according to the congressional Joint Committee on Taxation.

E. Martin Davidoff, a partner at tax firm Prager Metis, called the change unnecessarily complex and said it could discourage gamblers from reporting their income. "I see no winners -- not even the federal government," he said.

Some lawmakers are already trying to undo the change.

Sen. Catherine Cortez Mastro (D., Nev.) said she would bring a unanimous consent request to the floor Thursday to repeal the change. She said she had yet to hear of senators who would object.

In the House, Titus has the support of Democratic Rep. Ro Khanna of California and Republican Reps. Jeff Van Drew of New Jersey, Mark Amodei of Nevada and Troy Nehls of Texas. Nehls said that while he was proud to vote for the GOP tax-and-spending bill, he strongly disagreed with the gambling tax change.

He said the final version included an "overly punitive tax" on gambling. "This provision is unfair."

Write to Jasmine Li at jasmine.li@wsj.com

(END) Dow Jones Newswires

July 10, 2025 12:06 ET (16:06 GMT)

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