WASHINGTON — A gambler who wins $50,000 at the tables and loses $50,000 over the same year walks away even, no richer and no poorer. Under a tax rule the Internal Revenue Service moved a step closer to enforcing this week, that gambler will still owe the federal government income tax on $5,000 that never actually existed.
The IRS said Wednesday it will hold a public hearing July 17 on proposed regulations implementing a provision that limits gambling loss deductions to 90 percent of winnings, a change tucked into the sweeping tax law President Trump signed almost exactly a year ago. The hearing will not decide whether the rule survives. It will decide how the IRS writes the fine print for a rule that professional gamblers, casino trade groups and a bipartisan pair of lawmakers have been trying to kill since the day it passed, without success.
The proposed rules, filed as REG-113229-25, update decades-old regulations to reflect the new limitation and a separate change raising the reporting threshold for slot machine and bingo winnings, according to Bloomberg Tax, which first reported the hearing date. Both provisions take effect for the 2026 tax year and stem from the same law, formally titled the One Big Beautiful Bill Act, that Trump signed on July 4, 2025.
Gaming industry groups, including the American Gaming Association, have taken to calling the result “phantom income”: tax owed on money a bettor never actually kept. The mechanics are straightforward and, gambling executives argue, uniquely punishing. A taxpayer who wins $100,000 over a year and loses $100,000 chasing it, a net result of zero, can deduct only $90,000 of those losses against the winnings, leaving $10,000 in taxable income the gambler’s bank account never saw.
The 90 percent limit compounds a restriction that already excludes most casual gamblers from any benefit at all. Under longstanding IRS rules, a taxpayer can deduct gambling losses only by itemizing deductions on Schedule A, and only up to the amount of winnings reported, a structure the agency has maintained for decades, according to guidance published on IRS.gov. Roughly nine in ten filers now take the standard deduction instead of itemizing, meaning the new cap affects a narrower population than the political fight over it might suggest: mostly higher-volume bettors, professional gamblers and casino high-rollers who itemize as a matter of course.
DraftKings Chief Executive Jason Robins raised the same objection publicly within weeks of the law passing, telling CNBC‘s Jim Cramer the provision made no practical sense. “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,” Robins said in the August interview, a discomfort echoed since by casino operators who otherwise had little to complain about in a tax bill that cut their corporate rates.
Representative Dina Titus, a Nevada Democrat, introduced a one-line fix within two days of the law’s passage, the FAIR BET Act, which would simply restore the deduction to 100 percent. It has gone nowhere. The House Rules Committee declined to advance it in January, and in the Senate, Oklahoma Republican James Lankford has been an open opponent of reversing the change, arguing gambling losses deserve no more favorable tax treatment than the law already gives them. A separate, bipartisan bill introduced the same month, the FULL HOUSE Act, has not fared any better.
The gambling loss provision is a small piece of a law that has drawn sustained criticism for its downstream effects. The same legislation is the one that stripped food assistance from more than 3 million people this year, a pattern critics cite when arguing the bill’s savings were built on people with the least leverage to fight back. The gambling fight has an unusual coalition behind it by comparison: a casino industry that has spent the past year lobbying state legislatures for looser rules on mobile slot machines is now lobbying Washington for a tax break instead.
Not everyone unhappy with gambling policy is on the industry’s side of that fight. Ohio lawmakers moved this spring to roll back online betting access entirely after a surge in gambling-related harm, a reminder that the loudest current dispute over gambling policy, a tax deduction, is playing out separately from a quieter one over whether legalized betting has expanded too far, too fast, in the years since a 2018 Supreme Court ruling opened the door to state-by-state legalization.
The July 17 hearing gives the American Gaming Association, poker professionals and ordinary bettors one more chance to tell the IRS why the math should change before the rule locks in for good. Nothing said that day changes the underlying law, which only Congress can rewrite, and Congress has shown no appetite to do so twice already this year.
