House Panel Votes to Restore Full Gambling Loss Deduction as Tax Rules Face Change

Paula | September 22, 2026

Key Takeaways

• The House Ways and Means Committee voted 38-5 to advance legislation to restore the full federal deduction for gambling losses up to the amount of winnings.
• The measure could provide retroactive relief for 2026, but it still must clear the full House and Senate before becoming law.
• The House isn’t scheduled to return until November, giving proponents a short window to move the provision before the 2027 tax year.
• The current 90% deduction cap will remain in place until Congress passes and the president signs a new measure.

What Happened?

One of the more closely watched changes to the federal tax treatment of gambling is being undone by the House Ways and Means Committee.

On Sept. 16, the committee voted 38-5 to advance language that would restore the full deduction for gambling losses, as long as those losses do not exceed a taxpayer’s winnings from gambling. The provision was part of the Digital Asset Tax Certainty Act (H.R. 10357), a larger bill that addresses the taxation of cryptocurrencies.

The proposal would essentially roll back a change made under the One Big Beautiful Bill Act, which was signed into law in July 2025. That law reduced the gambling-loss deduction from 100% to 90% of wagering losses for tax years beginning after Dec. 31, 2025, while keeping the deduction limited to the amount of gambling winnings.

The old rules generally allowed a person who won $100,000 and lost $100,000 to deduct all $100,000 of losses against the winnings. If the winnings were under the 90% limit, the taxpayer could only deduct $90,000, meaning they could end up owing taxes on gambling income even if they didn’t make a net profit from gambling.

Critics of the current rule have described the issue as a tax on what are called “phantom income,” money that was bet and lost rather than kept as a gain.

Why the Timing Matters

Now we get into the congressional calendar. Lawmakers have a short window of time to move the proposal forward before Jan. 1, 2027, when the House is not scheduled to return until the second week of November.

If Congress approves it and it is signed into law, the measure would be retroactive to tax years that begin after Dec. 31, 2025, possibly affecting 2026 tax returns.

Casino operators and industry groups opposed to the 90% cap have also expressed support for the proposal. The American Gaming Association has said the reinstatement of the full deduction could boost the legal gambling market, and Wynn Resorts CEO Craig Billings has backed the change.

But for now, the committee vote does not change any tax rules. That deduction cap remains unless Congress approves and the president signs the proposed change.

What the Tax Proposal Means for Gambling Platforms

The House proposal is focused on the federal tax treatment of gambling losses and winnings, rather than on specific gambling products or platforms. Its main impact would be on how taxpayers account for gambling activity when filing their federal returns.

Sweepstakes casinos operate within a separate regulatory framework from traditional real-money gambling, with rules that can vary by jurisdiction. The current proposal does not specifically target sweepstakes casino operators or seek to change their operating models.

Instead, the legislation centers on whether gamblers should be able to deduct their full losses against gambling winnings for federal tax purposes.

What Happens Next?

The proposal now advances to the next stage of the congressional process. When they return to the House in November, lawmakers will have to take up the measure. Then it would go to the Senate, and if it passed there, to the president.

Any differences between the House and Senate versions would have to be reconciled before the measure could become law. The current 90% cap on deductions for gambling losses would remain in place until those actions are taken and the legislation is signed.

Reference

Digital Asset Tax Certainty Act