A recent Treasury hearing on gaming-related proposed regulations highlighted changes and concerns in the industry including the new wagering loss limitation, higher reporting thresholds, and need for IRS guidance on tracking gains and losses.
Beginning in 2026, gamblers are only allowed to deduct 90% of wagering losses, and then only to the extent of gains. As a result, a taxpayer who economically breaks even from wagering activity could still have taxable income because 10% of losses would be nondeductible. The new limitation was added to the tax code as part of the One Big Beautiful Bill Act (OBBBA), enacted in July 2025.
While Treasury and the IRS hosted the hearing to get feedback on implementing the rule, many took the opportunity to discuss its negative impacts and push for repeal by Congress. Industry stakeholders have raised concerns that the 90% limitation can create phantom income and could push gambling outside of legal establishments.
The AICPA and many others have supported repeal of the new limitation by backing legislative proposals that would restore full deductibility of wagering losses, subject to the extent of gains, as before. Although no taxpayer should assume the rule will be repealed, legislative activity and industry commentary make this an active area to watch.
Separate from the 90% limitation, questions remain about how taxpayers should measure wagering wins and losses. Many taxpayers and advisors look to a session-based approach for certain gaming activity, but IRS guidance on session methodology is limited even for traditional casino play. The growth of online gaming has intensified that uncertainty because much of the existing authority does not directly address modern online platforms.
Online gaming may involve continuous play, multiple platforms, automated records, frequent deposits and withdrawals, bonuses, and different game types occurring close together. Additional IRS guidance would help taxpayers, return preparers, and gaming operators determine when a session begins and ends, how to document session activity, and how session methodology should interact with the 90% loss limitation if the rule remains in effect.
The proposed regulations also included an update to certain gaming reporting. The OBBBA updated the general $600 information reporting threshold for the first time since its inception in 1954! This threshold applies to certain payments on Forms 1099-MISC, 1099-NEC, and certain winnings reported on Form W-2G (with exceptions). For payments beginning on January 1, 2026, the new reporting threshold for these items will be $2,000. Additionally, the number is indexed for inflation beginning in 2027 for the first time ever to avoid decades of stagnation.
Prior to the OBBBA, gambling payout thresholds for bingo, keno, and slot machines followed regulatory carve-outs of $1,200 for bingo and slots, and $1,500 for keno. Proposed regulations confirm that the these thresholds are also updated to $2,000 and will tie to the same statutory code section as the general framework going forward, rather than maintaining a separate dollar amount set in regulations.
As the gaming space and related tax rules continue to evolve, we will continue to monitor and communicate developments. Reach out to discuss how these rules may affect your situation.
Published: 07/27/2026
Readers should not act upon information presented without individual professional consultation.
Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.