04/07/2026
Reporting Gambling Winnings and Losses
As much fun as a trip to the casino or the racetrack can be, gambling transactions present some challenges from a tax standpoint.
The first challenge is that while winnings are tracked and reported to the IRS by casinos, sports betting sites, and others who host gambling activities, it's entirely up to you to keep records of losses and put them together at tax time. The second is that unless you're a professional gambler (someone engaged in the trade or business of being a gambler more or less full time), your losses can only be deducted as itemized deductions but your winnings go straight into your gross income. The third is that recent legislation has placed a new limit on the gambling losses you can deduct.
Before we dive into the rules for reporting and substantiating losses, let me give you a quick recap of the new loss limitation.
Changes for 2026
Starting in 2026, the One Big Beautiful Bill Act added a new permanent rule limiting "losses from wagering transactions" to 90 percent of the amount of such losses (not to exceed wagering gains). This loss limitation applies to both recreational and professional gamblers.
Example: Joe, a recreational gambler wins $3,000 at blackjack in 2026, loses $3,000 at video poker, and has no other wagering transactions. Joe must report the $3,000 in winnings as income on Form 1040. He can claim $2,700 of the losses (90 percent of $3,000) on Schedule A, Itemized Deductions, if he itemizes in 2026.
The new rule has a strange backstory: there is none. The provision, which did not appear in early versions of the legislation, and received virtually no public attention until the law was signed. It was added by the Senate Finance committee, but with no hint of its origin. Senate Finance Committee member Chuck Grassley (R-IA) said, "If you're asking me how it got in there, no, I don't know," in an interview a few days after the law passed. The provision has generated blowback from Republicans and Democrats in both the House and the Senate and several repeal proposals. As of yet, there's been no legislative action.
Claiming and Substantiating Gambling Losses
If you are a recreational gambler, you are required to report the full amount of your gambling winnings (with no reduction for gambling losses) as income on Form 1040, You can deduct your gambling losses (100 percent for years before 2026; 90 percent for years after 2025), up to the amount reported as gambling winnings, separately on Schedule A, Itemized Deductions. If you are filing a joint return for the tax year, you and your spouse's combined gambling losses are deductible to the extent of your combined winnings. Gambling losses in excess of winnings are not deductible.
If you qualify as a professional gambler, you can deduct your gambling losses (100 percent for years before 2026; 90 percent for years after 2025), up to the amount reported as gambling winnings as an above-the-line deduction in arriving at adjusted gross income, rather than as an itemized deduction. The deduction is reported along with your winnings on Schedule C, Profit or Loss from Business. Non-wagering expenses incurred to engage in the trade or business of gambling (e.g., travel expenses) are included in gambling losses and cannot be deducted if they exceed gambling winnings. Such expenses are subject to the same 90 percent limitation as wagering losses beginning in 2026.
Substantiation. In order to deduct your losses and business expenses, you must keep an accurate diary or similar record of your winnings, losses and expenses. You should maintain a diary which contains at least the following:
(1) the date and type of the specific wager or wagering activity;
(2) the name and address or location of the gambling establishment;
(3) the names of other people present with you at the gambling establishment; and
(4) the amounts won or lost.
You should also have other documentation in addition to a diary. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings; Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.
If you belong to the rewards program or players club at your casino, you may be able to obtain a win/loss statement or similar record that documents not only your winnings, but your losses as well. You should be able to obtain a similar statement from any online sports betting sites you use.
For specific wagering transactions, you can use the following items to support your winnings and losses:
Keno: Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check-cashing records.
Slot machines: A record of the machine number and all winnings by date and time the machine was played.
Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.): The number of the table at which you were playing and casino credit card data indicating whether a credit was issued in the pit or at the cashier's cage.
Bingo: A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets.
Supplemental records include any receipts from the casino, parlor, etc.
Racing (horse, harness, dog, etc.): A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.
Lotteries: A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.
