Are Gambling Losses Tax Deductible?

Yes, gambling losses are tax-deductible in the United States, but there are several strict requirements and a significant new limitation that took effect in 2026.

1. The “Itemization” Requirement

You can only deduct gambling losses if you itemize your deductions on Schedule A (Form 1040). If you take the standard deduction, you cannot deduct any gambling losses, even if they are substantial.

2. Deduction Limits (New for 2026)

Historically, you could deduct losses up to 100% of your reported winnings. However, under recent tax reforms (such as the One Big Beautiful Bill Act), the rules for the 2026 tax year have changed:

• The 90% Rule: You can now only deduct up to 90% of your gambling winnings.
• No Net Losses: You can never deduct more than you won. For example, if you won $5,000 but lost $10,000, you can only deduct a maximum of $4,500 (90% of your $5,000 winnings) as an itemized deduction. The remaining $5,500 in losses is not deductible against your other income (like your salary).

3. Reporting Process

The IRS does not allow you to simply report your “net” winnings. You must:

1. Report the full amount of your winnings as “Other Income” on your tax return.
2. Claim your allowed losses as a “Miscellaneous Itemized Deduction” on Schedule A.

4. Required Documentation

To claim these deductions, the IRS requires you to keep a detailed diary or similar record of your gambling activity. Your records should include:

• The date and type of specific wager or gambling activity.
• The name and location of the gambling establishment.
• The names of other people present with you at the gambling establishment.
• The amounts you won or lost.
• Supporting documents such as Form W-2G, wagering tickets, canceled checks, or credit card records.

5. State Tax Variations

It is important to note that state tax laws vary significantly. Some states (like Illinois or Connecticut) do not allow any deduction for gambling losses at the state level, meaning you may owe state taxes on the full amount of your winnings even if you had a net loss for the year.

Note: Because tax laws are subject to change and individual circumstances vary, it is highly recommended to consult with a qualified tax professional or use certified tax software when filing. For more details, you can refer to IRS Topic No. 419.