Updated September 2026
Gambling can be a fun pastime or a serious professional endeavor. Whether you're visiting a casino, buying lottery tickets or placing bets through an online sportsbook, however, there is one important thing to remember: gambling winnings are taxable income.
That includes winnings from traditional gambling activities as well as increasingly popular forms of online and sports betting. And beginning in 2026, taxpayers also face an important new limitation on how much of their gambling losses they may be able to deduct.
Understanding how gambling winnings and losses are taxed can help you avoid surprises when it is time to file your return.
Under federal tax law, gambling winnings generally must be reported as taxable income. This includes winnings from casinos, lotteries, raffles, horse racing, sports betting, online betting platforms and fantasy sports leagues.
Gambling income isn't limited to cash, either. The fair market value of noncash prizes, such as cars or trips, generally must also be included as income.
You are required to report your gambling winnings even if you don't receive a tax form reporting them.
Casual gamblers generally report their winnings as additional income on Schedule 1 of Form 1040. This makes maintaining accurate records especially important for taxpayers who use multiple casinos, sportsbooks or online gambling accounts during the year.
Depending on the type and amount of your winnings, the payer may issue Form W-2G, Certain Gambling Winnings, which reports gambling winnings and any federal income tax withheld.
For payments made during 2026, the IRS increased the minimum reporting threshold for certain information returns, including Form W-2G, to $2,000. However, the exact W-2G reporting and withholding requirements still vary depending on the type of gambling and, in some situations, the relationship between the winnings and the amount wagered.
The IRS also added a specific sports wagering section to its 2026 Form W-2G instructions, reflecting the growing prevalence of legal sports betting.
Importantly, receiving — or not receiving — a Form W-2G does not determine whether your winnings are taxable. All taxable gambling winnings must still be reported, even when no W-2G is issued.
Certain gambling winnings are also subject to federal income tax withholding. The regular withholding rate is generally 24% when the applicable requirements are met. If withholding isn't sufficient to cover the tax you'll ultimately owe, estimated tax payments may be necessary.
This is where one of the biggest tax changes affecting gamblers comes into play.
Beginning with the 2026 tax year, the federal deduction for gambling losses is limited to the lesser of:
90% of your gambling losses, or the amount of your gambling winnings.
Casual gamblers must also itemize their deductions on Schedule A to claim gambling losses.
This can produce an unexpected result.
Suppose you have $20,000 of gambling winnings during 2026 and $20,000 of documented gambling losses. Economically, you broke even. Under the new rule, however, only $18,000 — 90% of your losses — may be deductible. That could leave $2,000 of taxable gambling income even though you didn't have an actual net profit for the year.
This result is sometimes referred to as “phantom income,” and it makes accurate recordkeeping and tax planning even more important for frequent gamblers.
Claiming gambling losses also won't necessarily lower your taxes if you would otherwise take the standard deduction. For 2026, the basic standard deduction is $32,200 for married couples filing jointly, $16,100 for single taxpayers and married individuals filing separately, and $24,150 for heads of household. Additional amounts and other rules may apply.
2026 Legislative Update: Congress is considering legislation that would restore the ability to deduct 100% of gambling losses up to the amount of winnings. On September 16, 2026, the House Ways and Means Committee advanced legislation containing such a provision. It has not become law, however, so the 90% limitation remains the current federal rule.
If your gambling activity rises to the level of a trade or business, different reporting rules apply. Professional gamblers generally report their gambling activity on Schedule C rather than reporting winnings on Schedule 1 and losses on Schedule A.
Whether someone qualifies as a professional gambler depends on the facts and circumstances, including whether the activity is conducted regularly, continuously and with a genuine profit motive.
Professional gamblers may have expenses associated with their activity, such as travel, lodging, tournament entry fees and other ordinary business costs. However, those expenses are also affected by the federal wagering-loss limitation.
Under the current rules, deductions incurred in carrying on wagering transactions are included within the wagering-loss limitation. Beginning in 2026, that generally means the deduction is subject to the new 90% limitation and still cannot exceed wagering gains. Professional gambling activity is also treated as self-employment for federal tax purposes.
Because these rules can become complicated quickly, professional and high-volume gamblers should work closely with a tax advisor.
1. Maintain a detailed gambling log. Record the dates and locations of your gambling activity, the types of wagers you placed and the amounts you won and lost. With sports betting and online gambling, retaining account histories and year-end statements from each platform can also make tax preparation much easier.
2. Keep supporting documentation. Save wagering tickets, casino statements, sportsbook records, receipts and other documentation that supports both your winnings and losses. The IRS specifically emphasizes maintaining an accurate diary or similar record when claiming gambling losses.
3. Plan for withholding and estimated taxes. Income taxes are generally paid throughout the year through withholding or estimated tax payments. If significant gambling winnings aren't subject to sufficient withholding, consider whether estimated tax payments or additional withholding from other income may be appropriate.
The tax rules surrounding gambling winnings, sports betting and gambling-loss deductions can be more complicated than many taxpayers realize — particularly following the changes taking effect in 2026.
Failing to report gambling income can result in additional taxes, interest and penalties. At the same time, failing to maintain adequate records could prevent you from claiming gambling losses or other deductions you're entitled to take.
If you have significant gambling or sports betting activity, a Porte Brown tax professional can help you understand how your winnings and losses affect your federal and state tax obligations, determine whether estimated payments may be necessary and make sure your activity is properly reported.
Casino comps and promotional rewards can also raise tax questions. Noncash gambling prizes, such as cars or trips, are generally included in taxable income at their fair market value. The treatment of other complimentary benefits may depend on the specific circumstances, so taxpayers who receive significant casino comps or promotional benefits should maintain documentation and discuss their treatment with a tax advisor.
Get in touch today and find out how we can help you meet your objectives.
