The rules for gamblers in the United States are changing fast, and 2025 may be one of the most important years ever for the betting industry. Thanks to a new federal law signed in mid-2025, the way gambling winnings and losses are taxed has been updated, and not everyone is happy about it. Whether you’re a professional sports bettor or someone who just likes a weekend wager, you need to understand how these new rules might affect you. This article covers everything you need to know about the US gambling tax law changes for 2025.
What Changed in the 2025 US Gambling Tax Law?
The 2025 US gambling tax law, passed as part of the “One Big Beautiful Bill Act,” introduced a major shift in how gamblers report their winnings and losses. The most significant change is a cap on the amount of gambling losses that can be deducted from winnings on federal tax returns. Prior to this law, gamblers could deduct 100% of their losses, meaning that if your wins and losses balanced out over the course of the year, you owed no taxes. That’s no longer the case.
Under the new rule, only 90% of your gambling losses are deductible, regardless of how much you’ve actually lost.
Example 1: Balanced Win/Loss
- Before 2025:
- Winnings: $100,000
- Losses: $100,000
- Taxable Income: $0
- Under 2025 Law:
- Winnings: $100,000
- Deductible Losses: $90,000
- Taxable Income: $10,000
- Tax Owed (24% bracket): $2,400
Even though you broke even, you’ll now be taxed as if you made a profit.
Example 2: Small Profit Margin
Let’s say you had a modestly profitable year betting on sports or playing poker.
- Winnings: $80,000
- Losses: $70,000
Previously, your taxable income would be $10,000.
Now, you can only deduct $63,000 (90% of losses), so:
- Taxable Income: $17,000
- Tax Owed (24% bracket): $4,080
That’s a significant difference for a thin-margin year.
Example 3: Casino Player (e.g., Blackjack or Roulette)
This law doesn’t only affect sports bettors, it also impacts casino players who win or lose money playing blackjack, craps, slots, and roulette.
A regular blackjack player wins $50,000 but also loses $50,000 throughout the year.
In past years, no tax would be owed.
In 2025, only $45,000 of those losses are deductible.
So the IRS treats it as if you made $5,000 in profit and taxes you accordingly. Even casual weekend players who hit a lucky streak could find themselves unexpectedly paying taxes despite not ending up ahead overall.
Example 4: High-Roller at the Casino
Imagine a high-stakes gambler at a Las Vegas casino:
- Winnings: $500,000
- Losses: $480,000
- Deductible Losses: $432,000 (90%)
- Taxable Income: $68,000
- Tax Owed (at 32%): $21,760
The gambler really only made $20,000 in true profit, but under the new law, they’ll pay tax as if they made over three times that amount.
Why the US Gambling Tax Law Matters
Gambling is not just fun and games, it’s a huge business. With legal sports betting spreading across the country and online casinos booming, more Americans are wagering than ever before. But with the US gambling tax law now limiting deductions, the financial impact could be devastating for many.
Professional gamblers often survive on razor-thin profit margins. The new US gambling tax law forces them to pay taxes on money they didn’t truly earn. This could drive them out of business. Recreational gamblers might also pull back on their activity, hurting sportsbooks and casinos.
How the 2025 US Gambling Tax Law Affects Different Types of Gamblers
The impact of the new US gambling tax law extends far beyond just those who file large winnings on their taxes. From full-time professionals to casual weekend players, and even the sportsbooks and casinos themselves, this change affects nearly every corner of the gambling industry. Here’s a breakdown of how the law hits each group:
Professional Gamblers: Margin Destruction
Professional gamblers are perhaps the most severely impacted by the 2025 US gambling tax law. These individuals place hundreds or even thousands of wagers annually, often with razor-thin profit margins. Under previous tax rules, they could fully deduct their losses against their winnings, creating a fair system where only true profit was taxed.
Now, imagine a pro gambler wins $250,000 over the course of a year, but also loses $245,000. Previously, their taxable income would be $5,000. Under the new law, they can only deduct 90% of their losses $220,500 which means their taxable income jumps to $29,500.
At a 24% federal tax rate, they owe $7,080 in taxes on just $5,000 in real profit. That’s an effective tax rate of over 140% on actual income, which is financially unsustainable for someone gambling professionally.
Real-World Impact:
Many professionals may be forced to downsize their operations or move offshore.
The shift could result in more under-the-table gambling activity or unreported income, creating enforcement challenges.
Full-time sports bettors, poker players, and DFS grinders are the most at risk.
Recreational Gamblers: Taxed on Breaking Even
You don’t have to be a high roller for the US gambling tax law to sting. Even casual players who gamble for fun and stay relatively even over the year are now being taxed on “phantom” income.
Let’s say you bet consistently throughout the year and:
Win: $20,000
Lose: $20,000
Before 2025, you broke even, and that was the end of it. Now, you can only deduct $18,000 (90% of your losses). That means your taxable income is $2,000, even though you didn’t actually make any profit.
At a 24% tax rate, that’s a $480 tax bill for someone who thought they broke even. If you don’t keep detailed records or misunderstand the new rule, you could even underpay and get flagged by the IRS.
Key Takeaways for Rec Players:
Even moderate gambling wins could lead to a tax bill.
Keeping precise documentation of your wins and losses is now more important than ever.
You may want to reduce your betting volume to stay under reporting thresholds.
Sportsbooks and Casinos: Collateral Damage
While the US gambling tax law doesn’t directly tax gambling operators, it creates ripple effects that could change how they do business.
When professional and recreational bettors alike cut back due to higher effective taxes, sportsbooks and casinos lose money. Less betting volume means:
- Lower revenues
- Fewer big promotional offers
- Smaller prize pools in tournaments
- A potential increase in house edge to compensate
If fewer people bet on NFL Sundays or skip the blackjack table in Vegas, operators need to find other ways to stay profitable. That could mean:
- More aggressive marketing
- Prioritizing parlay bets and other high-margin games
- Downsizing VIP perks or comp programs
Offshore Shift:
Perhaps the most dangerous consequence for operators is the possibility that bettors migrate to offshore or crypto sportsbooks, which aren’t subject to US tax law. That not only siphons revenue from legal businesses, but also undermines efforts at regulation and responsible gambling.
Will This Lead to More Offshore Betting?
One of the biggest concerns about the 2025 US gambling tax law is that it might push people toward offshore gambling sites. These unregulated websites don’t report winnings to the IRS, which makes them appealing to bettors who want to avoid unfair taxation. The problem? These sites also don’t offer the same protections or guarantees.
This shift could weaken U.S. sportsbooks and lead to more illegal gambling. Ironically, while the law aims to collect more tax revenue, it might cause the government to collect less if fewer bets are placed in legal markets.
How the US Gambling Tax Law Could Change Sports Betting
Online sports betting has grown rapidly since 2018 when the U.S. Supreme Court opened the door for states to legalize it. Now, over 30 states allow it. But the 2025 US gambling tax law could slow or reverse that momentum.
Here’s how:
- Fewer high-volume bettors might participate.
- Sportsbooks may raise odds to protect profit margins.
- States that rely on sports betting tax revenue could see shortfalls.
- Smaller operators might shut down or merge.
Real-World Examples of the Impact
Example 1: The Pro Handicapper
John places 5,000 bets per year with a 2% return. He wins $500,000 and loses $490,000. Before the 2025 US gambling tax law, he paid no tax. Now, only $441,000 of his losses are deductible, and he’s taxed as if he made $59,000. His tax bill? Over $12,000 on $10,000 in real profit.
Example 2: The Casual Fan
Mary places bets during NFL season and wins $10,000 while losing the same amount. In the past, she paid nothing. Under the new law, $1,000 is considered profit. At a 24% rate, that’s $240 out of pocket.
What Accountants and Tax Pros Are Saying About the 2025 US Gambling Tax Law
As a practicing accountant, I can tell you that the 2025 US gambling tax law has introduced significant complications for both gamblers and tax professionals alike. We’re used to calculating taxes based on net income what you actually made after expenses. But this new law disrupts that principle by capping the deductibility of gambling losses at 90%, essentially taxing players on volume instead of actual profit.
Increased Record-Keeping Requirements
The number one piece of advice we’re giving clients right now? Track everything. Every single wager, win or lose, needs to be logged and timestamped. Betting slips, screenshots, sportsbook statements, all of it matters now. The IRS will expect clean, auditable records when reconciling reported gambling winnings and loss deductions under the new guidelines.
This law places a bigger burden on bettors, especially those who play often or across multiple platforms. Even casual gamblers who previously ignored recordkeeping now risk being surprised by unexpected tax bills if their deductions don’t meet the 90% rule.
“The US gambling tax law creates a disconnect between actual profits and reported income. A client could end the year breaking even but still owe hundreds or thousands in taxes. That’s not fair and it’s not how most of the tax code is designed to work,” says Thomas Brennan, CPA, a tax advisor based in Philadelphia who works with both recreational gamblers and professional poker players.
Tax Status: Hobby or Business?
Some clients have asked whether reclassifying their gambling activity from a business to a hobby might help them sidestep the change. But that strategy comes with its own risks. Hobby losses are generally not deductible at all, and winnings must still be reported as income. So unless your gambling activity is minimal, this may lead to even worse tax outcomes.
In general, most professionals should continue filing as self-employed under IRS Schedule C, but prepare for a higher effective tax rate on their gambling income unless future legislative changes restore full loss deductibility.
A Break From Traditional Tax Principles
Accountants across the country are puzzled by the policy shift. Traditionally, the U.S. tax code taxes net gains what’s left after your legitimate business or personal deductions. The 2025 US gambling tax law flips that idea on its head. Now, a gambler who wins and loses equal amounts will be taxed as if they profited.
From a technical standpoint, this sets a troubling precedent. It invites further tax code changes where other industries might be taxed on gross income without full expense recognition, creating confusion and unfair burdens for taxpayers.
What Can Bettors Do?
If you’re worried about how the new US gambling tax law affects you, here are a few tips:
- Track Everything: Keep a spreadsheet of every bet placed, including date, type, amount, and result.
- Talk to a CPA: Especially one who has experience with gambling clients.
- Consider Betting Less: Especially on high-volume strategies that now carry more tax risk.
- Use Player Rewards Wisely: Some sportsbooks offer tax offsets in the form of cash back, comps, or bonuses.
- Join Advocacy Groups: Some are already lobbying Congress to reverse the new law or adjust the 90% cap.
Could the US Gambling Tax Law Be Repealed?
There is already talk of challenging this provision. Critics say it unfairly targets an already heavily regulated industry and could reduce legal betting participation. Lawmakers from states that benefit financially from sports betting (like New Jersey, Nevada, and Pennsylvania) may push to roll it back or at least raise the 90% cap.
But for now, the law is in place and bettors must prepare.
The Bigger Picture: Will It Change Gambling Culture?
While the immediate concern is taxation, the 2025 US gambling tax law could reshape gambling culture in America. If it drives more people to illegal betting, lawmakers might regret the change. If it causes casual fans to quit, sportsbooks could lose the mainstream support they’ve spent years building.
The gambling industry has worked hard to become more accepted and regulated. This new law feels like a step backward to many insiders. It creates financial risk not just for bettors but for platforms and even state governments.
The 2025 US gambling tax law is one of the biggest shifts in U.S. betting regulations in recent years. It changes the financial rules for everyone from professionals who make a living through gambling to fans who bet just for fun. By capping gambling loss deductions at 90%, it creates a new tax burden that many say is unfair and could hurt the industry long-term.
If you’re serious about gambling or even just enjoy it casually now’s the time to get educated. Know your tax responsibilities, talk to an expert, and keep a close eye on how this change evolves in the coming months.
