"Big Beautiful Bill" Punishes Gamblers with Tax Consequences

Every now and then, a bill comes before the US Congress that must pass. Leadership of the majority party twists arms, if necessary, and enough members get in line to vote for a bill, even if they don't particularly like many of its provisions.

These big bills often become loaded up with other stuff - pet projects in lawmakers' districts, a special cause of a member of the majority, or a simple trade off for a vote for the bill in front of Congress. The bill is going to pass anyways, so it is the perfect vehicle to get what you want if you can't pass it through normal channels.

In fact, there's a same for it in the halls of Congress. It is called a "Christmas Tree," and everyone that gets a chance tries to hang their "ornament" on it. And by an "ornament," I'm talking about their personal project or cause.

This is not a partisan thing. Whether the majority is Republican or Democratic, there will be "Christmas Trees," and those bills will always be stuffed with other types of provisions beyond what is being debated in Congress.

Trump's Big Beautiful (Christmas Tree) Bill

The Tax Cut and Jobs Act, more commonly known as the "Big, Beautiful Bill," was one of those Christmas Tree bill situations. Republicans badly needed to pass it and it didn't really matter what was in the bill beyond their key priorities.

While the TV pundits and newspaper columnists debated Medicare, Medicaid, welfare and educational programs, lawmakers and staffers were getting lots of extras added to the bill...their "ornaments."

It wasn't the first time...

This isn't the first time we've seen this act, including as it relates to gambling in the USA.

In late September 2006, members of Congress, particularly those of the Republican majority that was in trouble and just weeks aways from a midterm election, were keen to finish up their buisiness and get home to their districts to campaign. However, they had one last big bill that needed to get signed into law by President Bush.

It was The SAFE Port Act of 2006 (Security and Accountability for Every Port Act.) This bill was the last piece of major legislation passed by Republicans before they lost their majority that fall.

At the time of passage, they knew that their majority was on borrowed time. That's why, in the middle of the night, two key U.S. Senators, Jon Kyl (R-AZ) and Bill Frist (R-TN), had some non-germane provisions added to the Port Security bill.

And what exactly were these provisions - or "ornaments" - that were added to the bill?

Senators Frist and Kyl wanted to ban internet gambling for a long time, however their bills would always get bottled up in committee and nothing would ever come of their efforts. However, in 2006, they saw their opportunity to kill online casinos...through the SAFE Port Act.

In the middle of the night, just hours before Congress would vote on the bill, the Senators added the ultimate ornaments to the "Christmas Tree SAFE Port Act." Their addition? The UIGEA, or Unlawful Internet Gambling Enforcement Act.

So it is no surprise here that, nearly twenty years later, Congress has given the shaft to gamblers very quietly hidden in the pages of a "must-pass" bill.

Major (Bad) Tax Changes for Gamblers in Trump's Bill

Under current law for the tax year 2025 (and previous tax years too), gamblers are allowed to take a deduction for any gambling losses to offset any reported winnings.

For example, if you had $200,000 of gambling winnings, but then you proceeded to lose it all back during the year, you could pay taxes on your net profit ($0) if you itemized on your tax return.

With the passage of the Big, Beautiful Bill, that will change in 2026, and it is an extremely bad change.

Starting January 1, 2026, taxpayers may only deduct up to 90% of their losses from their winnings. That means that you may even owe a significant tax bill, even if you lose money during the year.

For example, if you receive W2-G slot jackpots totaling $300,000 during the year and you lost it all back, plus $10,000 more, under current law for 2025 you will be down the $10,000, but you won't owe anything to Uncle Sam if you itemize your gambling losses on your tax return.

However, under this same scenario in 2026, you will only be able to deduct 90% of your losses, or $279,000. That means that you will owe taxes on $21,000 of "income" that doesn't even exist; you lost $10,000 for the year. Now Uncle Sam wants to make you lose even more!

That's some pretty awful news, but there is hope. There is already an effort in Congress to repeal this provision. Hopefully they can get it done before the new tax year begins.

The Fair Account for Income Realized from Betting Earnings Taxation (FAIR BET) Act, introducted by Reps. Dina Titus (D-NV) and Ro Khanna (D-CA) would restore the previous standard. Let's keep our fingers crossed that this becomes the law of the land.