US poker players filing for the 2026 tax year face a change that fundamentally alters the arithmetic of playing for a living: gambling losses are now deductible only up to 90% of their value, rather than 100%. The provision, part of the One Big Beautiful Bill Act, applies to tax years beginning after December 31, 2025, and it hits recreational filers on Schedule A and professionals on Schedule C alike.
The consequence is a category of income that does not exist in any other part of the tax code — money a player is taxed on despite never having received it.
How the Old Rule Worked
Under longstanding law, gambling losses were deductible against gambling winnings, capped at the amount of winnings. A player who won $50,000 and lost $50,000 in the same year reported $50,000 of winnings, deducted $50,000 of losses, and owed tax on nothing. That was the correct outcome, because nothing had been earned.
Note what the old rule already did not allow: losses in excess of winnings were never deductible, and never carried forward. A player who lost $30,000 net got no relief at all. The system was already asymmetric.
What Changed
The new provision caps the loss deduction at 90% of losses, still limited by winnings.
Work through the arithmetic. A player wins $100,000 across the year and loses $100,000. They report $100,000 in winnings. They may deduct 90% of their $100,000 in losses — $90,000. They owe tax on $10,000 of income despite having finished the year exactly even.
At a 24% marginal rate, that break-even year now costs $2,400 in federal tax. At higher marginal rates it costs more. And the disallowed 10% does not carry forward to future years — it is simply gone.
Why This Hits Poker Harder Than Other Gambling
The provision is nominally neutral across all forms of gambling. In practice it lands disproportionately on poker, for a structural reason that has nothing to do with intent.
Poker is a high-turnover activity. A tournament professional might enter 300 events in a year, cashing in perhaps 15% of them. Each cash is a win. Each buy-in that does not cash is a loss. Gross winnings and gross losses are both enormous relative to net profit.
Consider a player who enters 200 tournaments at $1,000 each — $200,000 in buy-ins — and cashes for $220,000. Net profit: $20,000. Under the new rule, they report $220,000 in winnings, deduct $180,000 of their $200,000 in losses, and are taxed on $40,000. They made $20,000 and owe tax on twice that.
A sports bettor placing a handful of large wagers has far less gross turnover for the same net result. A slots player has more. But poker's combination of high volume and thin margins makes it close to a worst case.
Cash game players face a similar problem depending on how sessions are tracked. The session-based accounting method that most players use aggregates within a session, which mitigates the effect somewhat — but it does not eliminate it for anyone with a substantial number of losing sessions. Our cash games guide covers how session structure differs from tournament entry accounting.
The Professional's Dilemma
Professional players filing on Schedule C are affected too, which closed the most obvious workaround.
Historically, filing as a professional carried advantages: business expense deductions for travel, and the ability to treat the activity as a trade or business. It also carried a cost, self-employment tax. The 90% cap applies regardless, so the calculation that once tilted marginal cases toward professional filing is now less clear.
The larger issue is that thin-margin professionals may find their break-even point has moved. A grinder whose true edge produced a modest annual profit may now be running at a loss after tax. The players affected are not the high-profile tournament winners — they are the volume grinders at mid stakes whose margins were always narrow.
This is worth stating plainly for anyone considering playing full time: the tax treatment of professional poker in the US is now materially worse than it was, and a bankroll and win rate that supported a professional career in 2025 may not in 2026. Our bankroll management guide covers the underlying arithmetic, but the tax layer now sits on top of it.
Reporting Thresholds
The W-2G reporting threshold for poker tournaments remains $5,000, unchanged. Slot machine reporting thresholds rose to $2,000 and will adjust for inflation annually going forward. Our payments guide covers how withdrawal documentation interacts with reporting.
The unchanged poker threshold is worth noting because $5,000 has not moved in decades. In real terms it has fallen substantially, which means a growing share of tournament cashes generate reportable paperwork.
The Case Against, and For
The provision was reportedly included as a revenue-raising measure rather than as gambling policy, which is the most common origin of tax rules with unintended consequences.
The argument in its favour, as its defenders present it, runs roughly as follows: the gambling loss deduction is a subsidy for an activity with substantial social costs, gambling has expanded dramatically since 2018, and limiting the deduction raises revenue from a population that has grown considerably. On this view, taxing 10% of gross losses is a modest levy on an expanded industry.
The argument against is that it taxes income that does not exist. Every other business activity in the US tax code permits full deduction of costs against revenue. A restaurant does not pay tax on 10% of its food costs. The provision treats gambling as uniquely undeserving of ordinary business treatment, and it does so in a way that falls hardest on the highest-volume, thinnest-margin participants rather than on the largest winners.
There has been legislative pushback, and proposals to restore full deductibility have been introduced. Whether they advance is uncertain.
What This Means for Players
Track everything, properly. Session-level records have always mattered. They now determine whether you are taxed on phantom income or not. Date, location, buy-in, cash-out, and game type for every session.
Understand session aggregation. How you define a session materially affects your gross winnings and gross losses figures. This is a question for a tax professional who understands gambling, not for a general preparer.
Recalculate your required win rate. If you play for income, the win rate that made you profitable last year may not this year. Run the numbers on your actual volume before assuming otherwise.
Consider volume, not just edge. The provision penalises turnover. A player with the same net result from fewer, larger events is taxed less than one grinding high volume at low stakes. That is a genuine strategic consideration now. Our cash games vs tournaments comparison covers how the two formats differ in turnover.
Get professional advice. This is not a situation for guesswork. The rules are new, the interpretations are unsettled, and the amounts at stake for a serious player are significant.
We are not tax advisors, and nothing here is tax advice — the specifics of any individual situation require a qualified professional. But the direction of the change is unambiguous, and any US player with meaningful volume should be running their own numbers well before filing season.