One Big Beautiful Bill Increases TAXES for Poker Fans
As people all over the United States celebrated Independence Day with barbecues, fireworks, and parades, President Donald Trump (R) was also celebrating the passage of his One Big Beautiful Bill, which he signed into law on July 4. This massive 870-page piece of legislation contains many disparate sections relating to spending, revenue, immigration enforcement, energy policy, and various other activities of the Federal Government. However, buried within its myriad provisions are changes to tax law that could negatively affect poker players and gamblers across the country.
About the Changes
The relevant section of H.R. 1 (One Big Beautiful Bill Act) would replace some of the existing wording in the U.S. Code Title 26 § 165. Title 26 is the Internal Revenue Code. A portion of this text read as follows before the adoption of the One Big Beautiful Bill Act:
(d) Wagering Losses
Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.
This means that those claiming wagering losses were limited to deducting as much loss as they have had profit. In other words, if someone won $100,000 and then lost $105,000 through gambling, that person could only claim $100,000 of the losses against the $100,000 in gains for a net gambling income of $0. They couldn't use the extra $5,000 of losses to offset other tax liabilities.
The new text for this part of § 165 now reads:
(d) Wagering Losses
(1) In general, For purposes of losses from wagering transactions, the amount allowed as a deduction for any taxable year
(A) shall be equal to 90 percent of the amount of such losses during such taxable year, and
(B) shall be allowed only to the extent of the gains from such transactions during such taxable year.
Further wording in the bill makes clear that this rule will take effect for all taxable years after 2025, i.e., the first year to which this provision will apply will be 2026.
Now, if someone wins $100,000 but loses $105,000 during a year, they can only deduct ($105,000 * 0.90) = $94,500 of the loss from the $100,000 win, leaving them with a taxable income of $5,500 – despite the fact that this individual actually booked a net loss of $5,000 from gambling for the year!
What Does This Mean for Poker Players?
This change in tax law is very disadvantageous for poker players especially winning regulars. Losing players might well record losses in excess of 110% of their earnings from poker year after year, and so they would be largely unaffected by the new rule. However, almost all winning players will see their net incomes after taxes decrease.
Poker Pros Especially Affected
If we consider the number of individuals who are able to beat the other players for a sufficient amount to cover the rake, travel expenses, accommodations, and all the other expenses of being a live poker pro, we must conclude that this portion of the player pool is a small minority of the total number of players. Increasing the effective tax rate will decrease their income such that many small winners or breakeven players can now no longer beat the game for a significant amount.
The effect on online poker pros will be less noticeable because they tend not to have as many expenses to cover, but even they will be impacted by this change albeit to a lesser extent than their live poker peers.
Some casual players, even winners, won't see any difference in their tax liability because this rule only impacts those who itemize deductions on their federal tax returns. Small winners generally opt for the standard deduction instead. Yet even recreational players will have years wherein they make a big score and so would stand to benefit from itemizing their losses. Now they will have to fork over more of their rare wins to the taxing authorities.
Entire Gaming Industry Hurt
It's not just poker players who stand to lose from the recent provisions of the law. Sharp sports bettors and daily fantasy sports gurus, who use their skills to achieve small but long-term edges, will now see their abilities to earn blunted.
Devotees of casino games with small house advantages, like blackjack and baccarat, often have some profitable and some losing years. Now their winning years will become smaller in magnitude, hurting their overall results. Even gamblers who try their luck at games with high negative expected values, like slots or keno, occasionally have a big win or two. They will now have to pay more taxes on these wins, which might lead some to quit playing altogether.
History of the New Rule
The new regulations pertaining to taxes and gambling losses were not present in the original version of the One Big Beautiful Bill as introduced in the House of Representatives in May. Neither were they a part of the bill as passed by the House by a narrow 215 – 214 vote on May 22.
The bill then headed to the Senate where several legislators withheld their support for the bill necessitating various amendments to placate them. Among these amendments were the tax changes, which were inserted into the document by Senator Mike Crapo (R) of Idaho who is the Chairman of the Senate Finance Committee. On July 1, the Senate passed this version of the bill by a vote of 51 – 50.
Idaho Senator Mike Crapo (R)Because the versions of the bill passed by the House and Senate were different, the legislation went back to the House. They agreed to the Senate's amendments, and the bill passed its final vote 218 – 212 on July 3. President Trump signed it into law the following day.
The way this anti-gambling text was inserted into the bill at the last minute without any debate or vote is reminiscent of what happened in 2006 when the UIGEA was snuck into the SAFE Port Act.
Reactions
Once the full contents of the One Big Beautiful Bill became known to the poker community, players were not shy about making their voices heard. Well-known poker pro Phil Galfond posted a video on X wherein he made his thoughts known:
Phil later walked back some of his comments particularly his statement that the amendment would “end professional gambling in the US.” He later conceded that professional gambling would still exist, but he cautioned that big winners would win less while those with smaller wins or breakeven results could be wiped out.
Many turned to the popular Twoplustwo forums to express their concerns and disgust with the current political situation:
One of the few dissenting voices belonged, oddly enough, to industry group American Gaming Association, which made a post on July 3 praising the new tax rules. “Our industry's ability to sustain quality jobs and deliver economic benefits is significantly enhanced…” part of it read. This take was widely panned by other industry participants.
Movement Underway to Undo Tax Changes
Though the move to restrict gambling deductions is probably irrelevant to most of the electorate, there's a sizable minority who are definitely affected and who dislike it immensely. This makes it a great candidate for concerted political action, and there have already been many proposals put forward to cancel it somehow.
The most serious action taken in this direction is probably the filing of the Fair Accounting for Income Realized from Betting Earnings Taxation Act (FAIR BET Act) by Nevada Representative Dina Titus (D). This bill, introduced on July 7, would restore the ability of gamblers to deduct 100% of their losses from their wins. It has been given the designation H.R. 4304.
Titus, co-chair of the Congressional Gaming Caucus, said:
The recently passed budget bill included a provision inserted by Senate Republicans without consent of the House that imposed a tax increase on Americans who gamble by reducing from 100 percent to 90 percent the amount of losses they can deduct from gambling winnings for their income taxes. My FAIR BET Act would rightfully restore the full deduction for losses so gamblers don’t pay taxes on money they haven’t won.
This common-sense legislation will bring fairness back to gaming taxation, making sure that gamblers can fully deduct losses when they report their winnings. It gives everyone – from recreational gamblers to high-stakes gamblers – a fair shake. We should be encouraging players to properly report their winnings and wager using legal operators. The Senate change will only push people to not report their winnings and to use unregulated platforms.
Nevada Congresswoman Dina Titus (D)Minimize Problems by Playing Online
When you play online at an offshore poker room, you aren't exempt from the new tax increase. But your overall expenses will be lower without having to physically go to the casino, pay for parking, buy overpriced food, et cetera. Thus, your bottom line might well be better in online poker than live poker. You should be aware, though, that at these international poker providers, you'll be responsible for calculating your own wins, losses, and tax liability because they don't report any of this information to the IRS or any other government agencies.
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July 8, 2025 – by Max Golden, Editor-in-Chief