Signed into law in July 2025 (the One Big Beautiful Bill Act, amending IRC §165(d)) and effective for tax years beginning January 1, 2026. Losses are deductible only up to 90% of losses — still limited to your winnings, and still only if you itemize.
Meet Alex — a year that was genuinely down:
The amended statute admits two computational readings of the limitation: cap losses at 90% and then limit them to winnings (this worksheet, $11,700), or limit losses to winnings first and then take 90% ($11,160 on this year). Which reading applies is an open item in TaxBet's verification queue. Your tax professional determines your filing position.
A losing year that owes roughly $154 in federal tax at an assumed 22% bracket — an estimate for illustration; your rate depends on your full return. The same fictional year appears on every page of this site — the sample report, the guides, the notice explainer — so the math always ties out.
Illustration — enter any figures. This is arithmetic on numbers you type, not your records: deductible losses under the 100% rule (tax years through 2025) and the 90% rule (2026 onward), and the amount that becomes taxable on a losing year. No AGI, no tax rate, no statement of what anyone owes. What the session method changes is a separate question.
Deductible losses = the smaller of winnings and losses × the year's rate. Taxable on a losing year = the smaller of winnings and losses × 10% — the same arithmetic as the Position Matrix's cap column. Your tax professional determines your filing position.
Under the cap, every dollar of overstated winnings is a dollar taxed with only 90-cent offsets. Filing from gross W-2G totals was expensive before; now it compounds. A documented session-based workpaper may produce a different income figure than a gross information-return total — TaxBet shows the calculation and assumptions for taxpayer and professional review.
Tax year 2026 returns — filed in spring 2027 — are the first ever computed under the cap. Your CPA hasn't seen it in practice either, because nobody has. Bring them the worksheet, not a shoebox.
Bills and actions affecting the cap, dated →
Related: got a CP2000 about gambling? · 2026 changes FAQ · how to get your transaction history