Whether you enjoy an occasional trip to the casino, play the lottery, bet on sporting events, or participate in poker tournaments, it’s important to understand how gambling affects your taxes. Many taxpayers are surprised to learn that gambling winnings are generally taxable – even if they lose money overall during the year.
The rules for the 2026 tax year introduce another important consideration: a change in the amount of gambling losses you can deduct on your federal income tax return.
At Bounds Accounting & Tax Services, we want you to understand these rules so you can keep accurate records, make informed financial decisions, and prepare for tax season with confidence.
Here’s what you need to know about deducting gambling losses on your 2026 taxes.
Are Gambling Winnings Taxable in 2026?
Yes. Gambling winnings are generally taxable income under federal tax law. This applies whether you win money at a casino, through a sports betting app, at a poker tournament, or from lottery tickets and raffles.
Taxable gambling winnings may include:
- Casino winnings from slot machines and table games
- Sports betting payouts
- Lottery and raffle prizes
- Horse racing winnings
- Poker tournament prizes
- Cash and the fair market value of noncash prizes
You must report taxable gambling winnings even if you don’t receive a Form W-2G from the gambling establishment.
A Form W-2G reports certain gambling winnings, but the absence of this form does not mean your winnings are tax-free. You are responsible for reporting all taxable gambling income on your federal tax return.
Important: Gambling winnings are generally reported separately from gambling losses. You cannot simply report your net profit or subtract all your losing bets from your winnings before reporting your income.
What’s Changing for Gambling Loss Deductions in 2026?
One of the most important tax changes for 2026 involves the deduction for gambling losses.
Under the new federal rule, gambling losses are generally deductible only up to the lesser of:
- 90% of your qualifying gambling losses for the tax year, or
- Your gambling winnings for the tax year.
This is a change from the rules that applied through 2025, when eligible gambling losses could generally be deducted up to the amount of gambling winnings.
The new limitation means that even taxpayers whose gambling losses equal their winnings may have some gambling income left without an offsetting deduction.
Example: How the 90% limitation works
Suppose you have the following gambling activity during 2026:
| Gambling activity | Amount |
| Gambling winnings | $20,000 |
| Qualifying gambling losses | $20,000 |
| 90% of gambling losses | $18,000 |
| Maximum potential loss deduction | $18,000 |
| Winnings not offset by the deduction | $2,000 |
In this example, the maximum potential federal gambling-loss deduction is $18,000, assuming you itemize deductions and meet the applicable requirements.
Although your winnings and losses are equal, the new rule generally leaves $2,000 of gambling winnings without an offsetting gambling-loss deduction.
This example illustrates why understanding the 2026 rules is especially important for anyone who regularly gambles or participates in sports betting.
You Generally Must Itemize Your Deductions
For casual gamblers, gambling losses are generally claimed as an itemized deduction on Schedule A of Form 1040. You cannot claim the deduction simply because you experienced gambling losses during the year.
To qualify, you must generally itemize deductions rather than take the standard deduction.
When deciding whether to itemize, compare your eligible itemized deductions with the standard deduction available for your filing status. Your gambling-loss deduction is only one part of that calculation.
Keep in mind that itemizing does not automatically make all your gambling losses deductible. You must still satisfy the recordkeeping requirements and the applicable deduction limits.
A tax professional can help you evaluate your situation and determine how gambling losses fit into your overall tax return.
Keep Detailed Records of Your Gambling Activity
Accurate documentation is essential if you want to claim gambling losses. Bank statements or a general estimate of how much you spent gambling may not be enough to substantiate your deduction.
The IRS recommends maintaining an accurate diary or similar record of your gambling activity, supported by receipts, tickets, statements, and other documentation.
Your records should include details such as:
- The date and type of gambling activity
- The name and location of the casino, racetrack, or sportsbook
- The amounts won and lost
- Relevant wagering tickets and transaction records
- Casino player statements or win-loss statements
- Sportsbook account histories and transaction reports
- Forms W-2G and other tax documents you receive
For casino gambling, retain available session records and supporting statements. For online sports betting, download your account activity and transaction history regularly.
A casino or sportsbook win-loss statement can be useful, but it should not automatically be treated as a substitute for all supporting records. The documentation you need may depend on the nature of your gambling activity.
Practical tip: Don’t wait until tax season to organize your records. Download statements periodically and maintain a running log of your activity throughout the year.
What If Your Gambling Losses Exceed Your Winnings?
Unfortunately, having more gambling losses than winnings does not generally allow a casual gambler to deduct the excess against wages, business income, or other taxable income.
For example, suppose you report $8,000 in gambling winnings and have $12,000 in qualifying gambling losses.
Under the 2026 federal rules, 90% of your losses would be $10,800. However, your deduction is also limited by your $8,000 in gambling winnings.
Your maximum potential gambling-loss deduction would therefore be $8,000, provided you itemize and satisfy the applicable requirements. The remaining $4,000 in losses would not be deductible under these rules.
The excess losses generally cannot be carried forward to a future tax year as a gambling-loss deduction.
This is an important distinction for taxpayers who gamble frequently. Even if you finish the year with an overall financial loss, your tax return may still show taxable gambling income.
What About Sports Betting Apps and Online Gambling?
The same general federal principles apply to taxable gambling winnings from online sports betting and other gambling platforms.
If you use betting apps, don’t assume the platform will calculate your taxable income or deductible losses for you.
A sportsbook account may show deposits, withdrawals, wagers, payouts, and net results. These figures do not necessarily represent the amounts that must be reported as gambling winnings or claimed as gambling losses on your tax return.
For example, a withdrawal from your account may include money you deposited previously, while a payout may include your original wager as well as your winnings. Simply adding deposits and withdrawals together will not necessarily produce an accurate tax calculation.
To prepare properly:
- Download your annual account statements and detailed wagering history.
- Collect any Forms W-2G or other tax documents you receive.
- Identify your reportable gambling winnings and qualifying losses.
- Keep documentation supporting the amounts reported on your return.
- Consult a tax professional if you have activity across multiple platforms or questions about how to classify your transactions.
The goal is to report your income accurately while claiming only the deductions permitted under the tax law.
7. Do Professional Gamblers Follow Different Rules?
Some individuals gamble as a trade or business rather than as a casual recreational activity. Whether someone qualifies as a professional gambler depends on the facts and circumstances of their activities.
Professional gamblers may have different reporting and expense considerations, including potential business reporting on Schedule C.
However, qualifying as a professional gambler does not mean that all gambling losses become fully deductible. The 2026 federal limitation on wagering losses also affects professional gambling activity.
If gambling is a significant source of your income, or you participate regularly in poker tournaments or other wagering activities as a business, it’s especially important to work with a tax professional familiar with these rules.
Your reporting requirements may be more complicated than those of an occasional gambler.
Don’t Forget About State Income Taxes
Federal tax rules are only part of the picture. State income tax treatment of gambling winnings and losses can differ from federal treatment.
If you live in Maryland, you should review the applicable Maryland income tax rules before assuming that a deduction allowed on your federal return will receive identical treatment on your state return.
Your state filing requirements may also depend on where gambling activity occurred, whether you are a resident or nonresident, and the type of gambling income involved.
A tax professional can help you determine which state rules apply and whether additional reporting is necessary.
Get Ready for Tax Season With Bounds Accounting & Tax Services
Gambling-related tax rules can be confusing, particularly with the new federal deduction limitation taking effect for the 2026 tax year. Understanding how winnings are reported, how losses are documented, and when itemizing makes sense can help you avoid errors when filing your return.
At Bounds Accounting & Tax Services, we help individuals and businesses navigate tax preparation and accounting questions with attention to their individual circumstances.
If you received gambling winnings during 2026 or have questions about documenting your losses, planning ahead can make tax season less stressful.
Contact Bounds Accounting & Tax Services to discuss your tax preparation needs and learn how professional tax guidance can help you make informed decisions.
Tax note: This article provides general information about federal tax rules for the 2026 tax year and is not individualized tax advice. Tax laws and filing instructions may change. Consult Bounds Accounting & Tax Services regarding your specific circumstances.
