Guidelines for Taxing Gambling Income and Deductions: Key Points to Recall
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In the United States, all gambling winnings, including winnings from online sports betting, must be reported as taxable income to the Internal Revenue Service (IRS) [5]. This income is reported as "other income" on your tax return.
Currently, taxpayers who itemize deductions can deduct losses only up to the amount of their gambling winnings. However, due to the One Big Beautiful Bill Act (OBBBA) enacted in 2025, the tax rules change significantly starting with the 2026 tax year.
Under the new rules, you will only be able to deduct 90% of your gambling losses or 90% of your gambling winnings, whichever is less [1][2][3][4]. This means even if your losses equal or exceed your winnings, you will still have to pay tax on at least 10% of your winnings.
Previously, if you broke even (wins = losses), your taxable gambling income could be zero. Under the new rules, even a break-even year will generate taxable income equal to 10% of your winnings [2][4].
These changes apply to both casual and professional gamblers and equally affect all forms of gambling, including online sports betting [2].
To ensure accurate tax reporting and planning, it's crucial to keep accurate records and documentation of your winnings and losses to substantiate claims on your tax return [5]. Additionally, losses cannot be deducted directly from winnings; instead, losses are claimed as an itemized deduction subject to the limits stated above.
Here's a summary table of the changes:
| Tax Aspect | Current Rule (through 2025) | Rule Starting 2026 (OBBBA) | |------------------------------|-----------------------------------------------|------------------------------------------------------------| | Reporting winnings | All winnings reportable as income | Same | | Deducting gambling losses | Losses deductible up to 100% of winnings | Losses deductible only up to 90% of losses or winnings, whichever is less | | Taxable amount if break-even | $0 taxable gambling income | 10% of winnings is taxable | | Applies to | Casual and professional gamblers | Same |
For anyone engaging in online sports betting, being aware of this new 10% "no deduction" portion of your winnings starting in 2026 is essential.
In the revised tax rules starting from 2026, your gambling winnings from online sports betting will still be subject to tax, even if you break even, as a minimum of 10% of your winnings will be taxable [2]. For comprehensive business and finance planning regarding online sports betting, it's crucial to keep accurate records and documentation of your winnings and losses, as the new tax regulations limit the deduction of gambling losses to 90% [5].
