Millions of Americans will lose money this month. Some will drop $20 in the office March Madness pool. Others will wager on the ever-expanding number of betting apps. A few will win big. Most people will lose money. 

Under longstanding tax rules, gambling winnings are taxable income. If you hit it lucky in your office March Madness pool, the Internal Revenue Service (IRS) expects its cut. The tax code has historically allowed professional gamblers and taxpayer who itemize to deduct their full losses against their winnings. This recognizes the basic principle that you should be taxed on your net income, not your gross receipts. 

Starting this year—thanks to the One Big Beautiful Bill Act—gamblers can only deduct 90 percent of their losses. That means a gambler who breaks even over the year will still owe tax on income they never actually earned.

The gambling change may seem small, but for professional gamblers, it could be disastrous. It also reflects a broader feature of the rest of the US tax code, which systematically limits how taxpayers can use losses across the economy. … Read More

(via Cato Institute)