Who is Affected by the Gambling Tax?

The new rule affects every gambler who itemises deductions and has gambling activity in tax year 2026. But the impact is not evenly distributed. Understanding which player profiles face the most significant harm helps you assess your own situation realistically. Professional gamblers face the worst outcomes under this rule. Players whose entire livelihood comes from gambling- poker professionals, horse racing handicappers, sports betting syndicates  often have enormous gross winnings and nearly equal losses. Their margin is measured in percentages of total volume. A bettor processing $2 million in annual wagers with a 2 percent edge earns $40,000 in real profit. Under the new rule, the 10 percent non-deductible portion of their losses creates roughly $200,000 in phantom income. Their tax on phantom income alone can dwarf their actual earnings. The Tax Foundation analysis found that some professional gamblers would face effective tax rates exceeding 100 percent of real income- meaning they would owe more in tax than they actually earned.

High-volume recreational gamblers- players who bet regularly at casinos, on sports, or online without treating gambling as a profession- are the second most affected group. Anyone with total annual gambling volume in the tens or hundreds of thousands of dollars will see a meaningful tax increase even if their net result for the year is zero or negative.

Casual gamblers with modest activity face less dramatic dollar amounts but are still subject to the rule. If you won $1,000 at a casino and lost $1,000 at a casino in 2026, you now owe tax on $100 in phantom income. At a 22% tax rate, that is $22- small, but the principle is the same as for high rollers.

Gamblers who do not itemise deductions are the one group the new rule does not affect additionally- but not for a good reason. If you take the standard deduction rather than itemising, you cannot deduct gambling losses at all under either the old rule or the new one. You report all your winnings as income and deduct nothing. The 90% rule does not change your situation because your situation was already the worst-case scenario. You already pay tax on gross winnings regardless of losses.

Expats and non-resident aliens who have gambling winnings sourced in the United States face the same 90% limitation and may also face treaty complications depending on their country of residence and any applicable tax treaties. This group is particularly likely to face surprising tax bills if they are not current on US tax law changes.