How are professional gamblers taxed in 2026 under the 90% rule?
By the W2gMatch team · Sources checked 09-28-2026 · General information, not tax advice.
Starting with tax year 2026, a professional gambler reporting on Schedule C may deduct only 90 percent of wagering losses, and section 165(d)(2) folds the business expenses of gambling into that same 90 percent, all capped at winnings. The limit comes from section 70114 of Public Law 119-21, signed July 4, 2025, for taxable years beginning after December 31, 2025.
The rule, as written
For taxable years beginning after December 31, 2025, section 165(d)(1) of the Internal Revenue Code says the deduction for losses from wagering transactions “(A) shall be equal to 90 percent of the amount of such losses during such taxable year, and (B) shall be allowed only to the extent of the gains from such transactions during such taxable year.” [1] Section 165(d)(2) then says that “the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.” [1] That second sentence is the one that reaches professionals: travel, lodging, data, software, coaching, tournament entry fees and every other ordinary business expense of gambling is treated as a wagering loss, so 90 percent (90%) of it counts, and the total can never exceed the year's winnings.
The 90 percent figure was added by section 70114 of Public Law 119-21, the One Big Beautiful Bill Act, signed July 4, 2025. [1] The expense-folding language is older: the Tax Cuts and Jobs Act added it for taxable years beginning after December 31, 2017 and before January 1, 2026, and the 2025 law kept it and removed the sunset. [1] So for tax year 2025 a professional could deduct 100 percent of losses and expenses together, capped at winnings; for tax year 2026 the same combined figure counts at 90 percent, still capped at winnings.
What counts as a “loss” for a professional in 2026?
Two things, added together before the 90 percent is applied:
- Wagers lost. Bets, buy-ins, coins played and stakes that did not come back, measured the way you measure wins: by session where the session method applies, by wager otherwise. The session method page explains the boundary.
- Otherwise-allowable business expenses of wagering. Anything that would have been an ordinary and necessary business deduction if section 165(d)(2) did not exist: travel to the casino or tournament, hotel nights, meals within the usual limits, subscriptions, odds data, solvers and tracking software, coaching, accounting fees for the gambling business, and a home office where one qualifies. [1]
A professional reports gross winnings as business income on Schedule C, the form for “income or loss from a business you operated or a profession you practiced as a sole proprietor,” [12] and takes the combined, 90 percent, capped deduction against it there rather than on Schedule A. Itemizing is not required. [12]
Worked example 1: a profitable year, 2025 versus 2026
A poker professional wins $300,000, loses $240,000 in buy-ins and cash-game sessions, and spends $30,000 on travel, hotels, data and coaching. The economic profit is $30,000. Here is what the return shows under each year's rule. The arithmetic is ours, applying the statute; the figures are illustrative.
| Line | Tax year 2025 | Tax year 2026 |
|---|---|---|
| Gross winnings (Schedule C income) | $300,000 | $300,000 |
| Wagering losses | $240,000 | $240,000 |
| Business expenses | $30,000 | $30,000 |
| Combined “losses from wagering transactions” | $270,000 | $270,000 |
| Percentage allowed | 100% | 90% |
| Deduction (below the $300,000 cap in both years) | $270,000 | $243,000 |
| Net Schedule C profit | $30,000 | $57,000 |
| Phantom income (taxed, never kept) | $0 | $27,000 |
Same year, same results at the table, and the 2026 return reports $27,000 more profit than the player made. That $27,000 is 10 percent of the $270,000 combined figure. The professional gambler calculator runs this table on your own numbers, including the self-employment tax below.
Worked example 2: a break-even year that owes tax
Tax year 2026. The player kept nothing; the 2025 rule would have shown $0 profit. Illustrative arithmetic applying section 165(d) as amended.
This is phantom income (taxable income created by the 90% limit in a year the player did not come out ahead: the 10% of losses and expenses the deduction no longer covers) on a Schedule C, and it is worse than the same figure on a Schedule A, because net Schedule C profit is also net earnings from self-employment. The phantom income guide walks the casual-gambler version.
Do professional gamblers pay self-employment tax on phantom income?
Yes. Self-employment tax is 12.4 percent for Social Security plus 2.9 percent for Medicare, 15.3 percent in total, and it is generally figured on 92.35 percent of net earnings from self-employment. It is owed once net earnings reach $400, and one-half of it is deductible when figuring adjusted gross income. [9] The statute does not carve the disallowed 10 percent out of net earnings, so it is taxed twice over: once as income and once as self-employment income.
Tax year 2026, before income tax. On example 1 the same computation gives about $8,054 of SE tax on $57,000, against about $4,239 on the $30,000 the 2025 rule would have shown. Rounded; our arithmetic from the Topic 554 rates.
The Social Security portion stops at the annual wage base and the Medicare portion does not; we have not reproduced the 2026 wage base here, so check it against the Social Security Administration's figure before relying on a large-profit estimate.
Can a professional gambler show a Schedule C loss or carry it forward?
No. A professional gambler cannot report a net Schedule C loss from gambling and cannot carry an unused loss forward, because section 165(d)(1)(B) allows the deduction “only to the extent of the gains from such transactions during such taxable year.” [1] The floor on the Schedule C bottom line is zero. That was already true for 2025, when losses and expenses together could not exceed winnings; 2026 adds the 90 percent haircut on top.
A losing year, tax year 2026. The 2025 rule gives the same $0; the cap, not the percentage, is binding. No net operating loss is created in either year.
Am I a professional gambler? The Groetzinger test
Status is a question of fact, not an election, and the IRS pages on gambling still describe only the casual case: winnings on Schedule 1, losses on Schedule A. [2] [3] The standard for a trade or business comes from the Supreme Court in Commissioner v. Groetzinger, 480 U.S. 23, decided February 24, 1987: “if one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business.” [10] Mr. Groetzinger spent 60 to 80 hours a week, six days a week for 48 weeks of 1978, handicapping and betting on greyhound races; he wagered $72,032, won $70,000 and finished the year $2,032 down, and the Court still held he was in the business of gambling. [10]
In practice that means hours that look like a job, records that look like a business, a genuine attempt to make a living from it rather than a bankroll funded by a salary, and a pattern that continues across years. A player with a full-time job elsewhere and a big W-2G year is almost never a professional, and choosing Schedule C because the result is cheaper is the fact pattern the IRS looks for. Have a preparer decide this with you before the return is filed.
Professional versus casual gambler in 2026, side by side
| Item | Professional (trade or business) | Casual |
|---|---|---|
| Where winnings go | Schedule C, gross receipts | Schedule 1 (Form 1040), line 8b |
| Where losses go | Schedule C, against receipts | Schedule A, line 16, other itemized deductions |
| Must itemize? | No | Yes; no benefit below the standard deduction |
| Business expenses deductible? | Yes, but folded into “losses” and inside the 90% and the cap | No |
| 90% limit applies? | Yes, to losses and expenses together | Yes, to losses |
| Capped at winnings? | Yes | Yes |
| Self-employment tax? | Yes, 15.3% on 92.35% of net profit | No |
| Net loss or carryforward? | Never | Never |
Sources: section 165(d) [1], Topic 419 [2], Schedule A instructions [4], Topic 554 [9], About Schedule C [12].
Does going pro still help in 2026?
Sometimes. Take the example 1 player and assume they are a casual gambler instead: $300,000 of winnings on Schedule 1, and on Schedule A a deduction of 90 percent of the $240,000 of wagering losses, $216,000, with none of the $30,000 of expenses allowed. Taxable gambling income is $84,000, against $57,000 on the Schedule C version, and the casual filer also gives up the standard deduction to itemize: $16,100 for a single filer or $32,200 married filing jointly in 2026. [11] The professional pays roughly $8,054 of self-employment tax on the $57,000 and deducts half of it. Which return costs less depends on the size of the expenses, the filing status and the marginal rate, so run both computations with real figures. Status is still decided by the facts, not by which answer is cheaper.
Two things Schedule C does not do in 2026: it does not escape the 90 percent limit, and it does not turn a losing year into a deductible one. It changes where the numbers go, adds self-employment tax, and lets the expenses count at 90 cents on the dollar instead of not at all.
What records does a professional need under the 90% rule?
The same diary the IRS asks of every gambler, kept to a business standard: the date and type of each wager, the name and address or location of the establishment or site, the names of others present, and the amounts won or lost, backed by Forms W-2G, wagering tickets, canceled checks, credit records and statements from the establishment. [2] [3] For a professional add the expense side: receipts and a log tying each trip, subscription and entry fee to the gambling business.
The 90 percent rule raises the cost of a missing record. Only nine-tenths of a documented loss counts, and an undocumented loss counts for nothing, so a professional who cannot show $20,000 of losses gives up $18,000 of deduction and pays income tax and self-employment tax on the difference. Operator win/loss statements are estimates, not the diary; reconcile them to the W-2Gs the IRS already holds so winnings are not overstated and every loss dollar is supported. The session log template is the diary format, and the reconciliation page shows how the forms fit together.
Do the W-2G thresholds change for professionals?
No. Payers issue Form W-2G on the same rules to everyone. For payments made in calendar year 2026 the slot, bingo and keno threshold is $2,000, indexed for inflation after that, and other wagers use the 300-times-the-wager test. [5] A professional's gross receipts must include every win whether or not a form arrived; the forms set a floor, not the total. The thresholds page has the full table.
State returns
States do not all follow the federal deduction. Illinois, for example, allows no subtraction for gambling losses, [6] and Ohio has no gambling-loss adjustment either. [7] Both start from federal adjusted gross income, so a casual gambler in those states, whose losses sit on Schedule A below that line, is taxed on gross winnings. A professional is in a different position on paper: what flows into federal adjusted gross income is the net Schedule C profit, already limited to 90 percent and capped. Whether a state accepts trade-or-business treatment for gambling, and what it does with the 90 percent figure, differs by state and is not something the sources above address, so confirm it with a preparer licensed there. The state-by-state page covers the states we track.
Where repeal stands
The 90 percent rule is the law for 2026 returns as of this page's review date. The FAIR BET Act (H.R. 4304, Rep. Titus) was blocked from a House floor vote in January 2026. [8] On September 16, 2026 the House Ways and Means Committee voted 38-5 to advance H.R. 10357, a digital-asset tax bill introduced by Rep. Jason Smith that carries language restoring the full deduction beginning with tax year 2026; a House floor vote is not expected before the November 2026 midterm elections, and the Senate has not acted. [13] Nothing is enacted. Plan the 2026 year on the 90 percent rule and revisit before filing.
What that means before December 31, 2026: keep the diary current, keep expense receipts, and know the break-even figure now rather than in April, because estimated tax on phantom income and self-employment tax is due through the year.
Related questions
Does the 90% gambling loss rule apply to professional gamblers in 2026?
Yes. For tax years beginning after December 31, 2025, section 165(d) allows 90 percent of wagering losses, capped at gains, and section 165(d)(2) treats a professional's gambling business expenses as wagering losses, so the 90 percent applies to losses and expenses together on Schedule C.
Can a professional gambler show a loss on Schedule C or carry it forward?
No. Section 165(d)(1)(B) allows the deduction only to the extent of the year's wagering gains, so the most a professional can report is zero net profit. Unused losses and expenses are lost permanently; they are not carried forward as a net operating loss.
Do professional gamblers pay self-employment tax on phantom income?
Yes. Net Schedule C profit, including the 10 percent of losses the 2026 rule disallows, is net earnings from self-employment. Self-employment tax is 15.3 percent (12.4 percent Social Security plus 2.9 percent Medicare) on 92.35 percent of net earnings, and one-half of it is deductible in figuring adjusted gross income (IRS Topic 554).
Is it still worth filing as a professional gambler in 2026?
Sometimes. Schedule C lets you deduct losses and expenses without itemizing, but adds self-employment tax and puts the expenses inside the 90 percent cap. Run both computations with actual figures. Status is decided by the facts under Commissioner v. Groetzinger, not by which result is cheaper.
What records does a professional gambler need under the 90% rule?
A contemporaneous diary showing the date and type of each wager, the establishment or site, others present and amounts won or lost, plus expense receipts, operator win/loss statements and every W-2G, reconciled so reported winnings match what the IRS holds and every loss dollar is documented, because only 90 percent of documented losses count and undocumented losses count for nothing.
Did the 2025 rule already limit a professional's expenses?
Yes. For taxable years 2018 through 2025 the Tax Cuts and Jobs Act already treated a professional's gambling business expenses as wagering losses, so losses plus expenses could not exceed winnings. For 2025 the combined figure counted at 100 percent; for 2026 it counts at 90 percent.
Has the 90% rule been repealed for professional gamblers?
No. On September 16, 2026 the House Ways and Means Committee voted 38-5 to advance H.R. 10357, which carries language restoring the full deduction from tax year 2026, but a floor vote is not expected before the November 2026 midterms and the Senate has not acted. Until a repeal is signed, the 90 percent rule applies to 2026 returns.
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Run the 90% rule on a Schedule C year
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Sources
- 26 U.S.C. § 165(d), Wagering losses, as amended by Pub. L. 119-21 § 70114 (Legal Information Institute), amendment effective for taxable years beginning after December 31, 2025
- IRS Tax Topic 419, Gambling income and losses, page last reviewed June 11, 2026
- IRS Publication 529, Miscellaneous Deductions, Gambling losses up to the amount of gambling winnings, Rev. December 2020
- IRS Instructions for Schedule A (Form 1040), line 16, Other itemized deductions, tax year 2025 edition
- IRS Instructions for Forms W-2G and 5754, Rev. January 2026
- Illinois Department of Revenue, What other income is not allowed as a subtraction?, read September 6, 2026
- LegalClarity, How to deduct gambling losses on your Ohio tax return (Ohio has no gambling-loss adjustment), read September 6, 2026 (secondary source)
- Gambling News, House Rules panel stops FAIR BET Act as 2026 gambling tax change approaches, January 2026 (secondary source)
- IRS Tax Topic 554, Self-employment tax, page last reviewed September 24, 2026
- Commissioner v. Groetzinger, 480 U.S. 23 (Legal Information Institute), decided February 24, 1987
- IRS IR-2025-103, tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill, October 9, 2025
- IRS, About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), 2025 revision
- Covers, House committee advances repeal of 90 percent gambling loss deduction limit, September 16, 2026 (secondary source)
Related
- What is the OBBBA 90% gambling loss cap for 2026?
- Can I deduct gambling losses in 2026?
- What is the session method for gambling taxes in 2026?
- How do I substantiate gambling losses for a client?
- How do I reconcile W-2Gs, 1099-Ks and win/loss statements for a gambling client?
- What is the W-2G threshold for 2026?
- Which states tax gambling and sports betting winnings, and which allow losses?
This page is general information about how U.S. federal and state tax rules apply to gambling, written to be checked against the sources it cites. It is not tax advice for your situation. A licensed CPA or enrolled agent should review your return before it is filed.