Law Reversal Looming? Trump Eyes 2026 Gambling Winnings Tax Change
Summarize this article with:
It's no secret that the IRS is coming after your gambling winnings in 2026. But how long will that last? When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Gambling winnings are expected to be taxed more next year — at least federally. Thanks to the 2025 GOP/Trump tax and spending bill, a portion of winnings from activities like lotteries, slot machines, and sports betting face a potential double taxation.That's because prior IRS gambling rules allowed you to deduct all gambling losses up to the amount of winnings. Starting in 2026, losses are limited to 90% of winnings.But just weeks before the new gambling tax provision becomes effective, President Donald Trump reportedly said he would "think about" repealing income taxes on gambling winnings entirely.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.Here's more of what to know.When reporters asked President Trump in early December if he would consider eliminating federal taxes on gambling winnings, he remarked, "No tax on gambling winnings, I don't know. I'm gonna have to think about that."This suggestion stands in stark contrast to the effects of the major legislative Republican tax bill enacted in July. Starting January 1, 2026, the new GOP law will impose a tax cap, limiting gambling loss deductions to 90% of winnings (down from 100%) — a provision that may hike the tax bill for many gamblers.For example, if you pay $100 for state scratch-offs and win $100, you could owe the government $10 on your "winnings" in 2026.Gaming industry leaders and stakeholders, including the American Gaming Association, have referred to this new tax scenario as "phantom income." This term is used because the new cap forces gamblers to pay taxes on losses — a rule the AGA argues is "uniquely penalizing" gambling compared to other businesses.And the new gambling tax provision is expected to generate a significant amount of phantom income. According to the Joint Committee on Taxation, taxing Americans on 10% of their gambling losses could generate over $1.1 billion over the next decade.While most of those earnings are expected to come from high-wealth, professional gamblers, any taxpayer who itemizes their gambling losses could be subject to paying more tax due to the new IRS gambling rule in 2026.In recent years, the IRS has ramped up its investigative work on gambling winnings.Under the Biden administration, the agency began enforcement efforts with taxpayers whose income was $100,000 or more, vowing to take a closer look at sports betting and online gambling in particular.Since then, overall IRS audits have decreased under the Trump administration, particularly for high-income taxpayers. Yet the IRS still views nearly all recreational and professional gambling as taxable income.As such, here are some types of gambling income that could be subject to an IRS audit:Whether a casual gambler or a professional, all gambling winnings are always subject to federal income taxes. Losses are deductible on Schedule A of Form 1040, up to 90% of the amount of gambling winnings for tax year 2026 (100% for tax year 2025). To claim the deduction, you must keep detailed tax records of your wagers (e.g., tickets, receipts, forms, etc.).Tip: Also check with your state and/or local jurisdictions for how more localized taxes apply. Gambling is not legal in all states. As Kiplinger has reported, the new gambling winning tax provision in the new Trump tax law has faced considerable backlash from industry giants and government officials.Jason Robbins, CEO of DraftKings (popular sports betting platform), remarked in an interview with CNBC, "If you can't deduct all your losses, you know, how does that make sense that you pay income tax on something that's not actually income."Rep. Jason Smith (R-MO), Chairman of the House Ways and Means Committee and advocate of the new 2025 Trump tax law, called the provision a "mistake" and added that he was committed to working on a fix.In the meantime, there have been proposals to repeal the new gambling tax law. For instance, the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET), proposed by Rep. Dina Titus (D-Nev), would revert the 90% gambling winnings loss deduction to 100% of gambling winnings.Titus has been a lead critic against the new gambling winnings provision, citing negative economic impacts on Nevada and other "gaming-dependent" states.Still other bipartisan bills have been introduced in Congress to repeal or modify the gambling tax provision, though all have stalled in committees and have not yet received votes in either the Senate or the House. Ongoing pressure from lawmakers and, now, the President, may help bolster a bipartisan deal or amendment in the new year.Stay tuned for updates.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.
Tax Policy The potential consequences of eliminating taxes in favor of Trump tariffs could impact everything from inflation to Social Security and might give some U.S. taxpayers pause. The November jobs report came in higher than expected, although it still shows plenty of signs of weakness in the labor market. Families can upgrade to top-tier smartphones for $25 a line with Verizon’s newest offer.
Tax Policy The potential consequences of eliminating taxes in favor of Trump tariffs could impact everything from inflation to Social Security and might give some U.S. taxpayers pause.
Gift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
Tax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
Tax Law Updated taxpayer protections change what the IRS must explain on error notices and how long you have to respond.
Tax Refunds Here's how the IRS tax refund outlook for 2026 is changing and what steps you can take now to prepare. Tax Policy A proposal from GOP Sen. Josh Hawley adds to the chatter about health care affordability.
Tax Tips We found the state with no income tax, low property tax bills and exemptions on groceries and medicine. Tariffs The retailer is making headlines not just for its famous hot dog and gold bars but for suing the Trump administration over tariffs.