Federal Tax Return: a Practical Action Checklist

The guidance below applies to any gambler who has placed wagers in 2026 and will need to file a federal tax return covering 2026 activity. Start your gambling log immediately if you have not already. Record every session from this point forward. For past 2026 activity, retrieve account histories, loyalty card statements, and any records you have from the period already elapsed. Reconstruct what you can while the information is still accessible.

 

Request win/loss statements from every casino and gambling platform you have used in 2026. Do this now, not in January 2027 when these requests pile up. Major casinos and licensed sportsbooks typically have this data available in your account or through player services.

 

Assess whether you itemise deductions. Add up your likely 2026 itemised deductions: mortgage interest, state and local taxes (capped at $10,000), charitable contributions, and now gambling losses under the 90% rule. If the total is less than the applicable standard deduction, your gambling losses provide no tax benefit and your focus should be on accurate income reporting alone.

 

Calculate your likely 2026 gambling tax position. If you have significant gambling volume, run through the maths in the scenarios section of this article with your own numbers. The result will tell you how much phantom income the 90% rule is likely to generate and what additional tax you should expect to owe.

 

Consider setting aside funds for the tax liability. If the maths shows you will owe a meaningful amount of additional tax from phantom income, consider setting aside that amount now rather than waiting until April 2027. This is basic tax planning that becomes significantly more urgent under the new rule.

 

Consult a tax professional before filing your 2026 return. This is particularly important if you are a professional gambler, have high-volume gambling activity, use offshore or crypto platforms, have gambling income across multiple states, or have any uncertainty about how the new rules apply to your specific situation. The gambling tax landscape in 2026 is materially more complex than in prior years, and the cost of professional advice is typically far lower than the cost of an error.

 

Monitor legislative developments. The FAIR BET Act, the FULL HOUSE Act, and any new repeal legislation that emerges in the second half of 2026 should be watched. Reputable tax news sources including Tax Notes, Kiplinger, and the Tax Foundation blog will cover any material legislative changes in this area. A repeal before December 31, 2026 would apply to your 2026 return. A repeal after January 1, 2027 would apply to tax year 2027 forward.

 

QUICK-REFERENCE FAQ: THE MOST SEARCHED GAMBLING TAX QUESTIONS IN 2026

 

Does the new 90% rule apply to my 2025 tax return? No. The 90% rule took effect on January 1, 2026. Your 2025 gambling activity is covered by the old 100% deduction rule. Returns for tax year 2025, typically filed in early 2026, use the previous law. Only gambling activity from January 1, 2026 onward is subject to the new cap.

 

What if my total losses were greater than my total winnings? You still apply the 90% rule to your losses, but the losses are first capped at your total winnings. If you won $40,000 and lost $60,000, your deductible losses are first capped at $40,000 (your total winnings), then reduced to 90%, giving you a deduction of $36,000 against $40,000 in winnings. Taxable gambling income: $4,000. The $20,000 in excess losses above your winnings are still disallowed entirely.

 

Does the rule apply to lottery winnings and losses? Yes. All gambling activity including lottery tickets, scratch cards, raffle tickets, and game shows falls under the same framework. Lottery winnings are income. Ticket costs are losses. The 90% cap applies.

 

Does the rule apply to prediction market activity on Kalshi or Polymarket? This is currently unresolved. Prediction market activity may be treated as gambling under the UIGEA framework or as trading in financial contracts under CFTC regulation, with very different tax consequences under each classification. The IRS had not issued definitive guidance on this distinction as of May 2026. Players with significant prediction market activity should consult a tax professional familiar with both gambling and derivatives tax law.

 

What if the FAIR BET Act passes before I file my 2026 return? If repeal legislation is enacted before you file, the previous 100% deduction rule would apply to your 2026 gambling activity. You would not owe tax on phantom income. Keep following legislative developments and file after any clarity emerges- you can file for an extension to October 2027 if needed while waiting for legislative resolution, but be aware that any tax owed is still due by April 2027 even if your return is on extension.

 

Are professional gamblers treated differently? Professional gamblers report activity on Schedule C rather than Schedule A and may deduct ordinary business expenses such as travel and entry fees. The 90% cap applies to both professionals and recreational gamblers under the current law. Professional classification requires meeting IRS standards for regularity, business-like conduct, and profit motive, and typically requires specialist tax advice to establish and maintain correctly.

 

Does the rule apply if I gamble at offshore or unlicensed platforms? Yes. All gambling winnings are taxable US income regardless of where earned, what currency was used, or whether the platform issued any tax documentation. Your reporting obligation exists regardless of the platform's reporting practices.