How to Report Gambling Winnings and Losses on your 2026 Tax Return?

The mechanics of reporting under the new rule follow a specific structure that differs from how many players intuitively think about their gambling activity. Step one is reporting all gambling winnings as income. All gambling winnings  from every source, including casinos, online platforms, sports betting apps, racetracks, lottery tickets, raffles, and game shows  are reported as gross income on Line 8b of Form 1040 (the exact line reference may vary; check current IRS instructions). This happens before any losses are considered. The IRS does not allow you to net your winnings and losses and report only the difference. Every win is income.

Step two is calculating your allowable deduction on Schedule A. Your total gambling losses for the year are first subject to the existing cap- losses cannot exceed total winnings. Then the 90% rule applies to the capped amount. So if your total losses are less than your total winnings, multiply your total losses by 0.90. If your total losses are greater than or equal to your total winnings, multiply your total winnings by 0.90. The result is your maximum allowable gambling loss deduction, reported on Schedule A, Line 16.

Step three is understanding session-based reporting. The IRS does allow gamblers to net their wins and losses within the same session on the same day for the same type of wagering, under specific circumstances. This means you do not necessarily have to report every individual slot spin or blackjack hand as a separate transaction. However, you typically cannot offset a winning day at the casino against a losing day at the casino to reduce your gross winnings figure. Winnings and losses are reported separately- gross winnings as income, total losses (subject to the new caps) as a deduction.

Step four involves Form W-2G. If a casino or sportsbook issued you a W-2G form for certain winnings, those amounts must be reported exactly as shown on the form. The IRS receives a copy of every W-2G issued and will match it to your return. Failing to report W-2G income is one of the most common triggers for gambling-related IRS audits.

Professional gamblers face additional complexity. If the IRS classifies your gambling activity as a trade or business- which requires demonstrating consistent, profit-motivated activity conducted with regularity and in a business-like manner- your winnings and losses are reported on Schedule C rather than Schedule A. The 90% cap still applies, but you may also be able to deduct ordinary business expenses such as travel, entry fees, and software costs. Professional gamblers should consult a tax professional familiar with gambling tax issues before filing, as the classification of professional versus recreational gambling has significant consequences.