Overview of the Legislation
Signed into law in July 2025, the One Big Beautiful Bill Act is a sweeping tax and spending reform package championed by former President Donald Trump. While it includes provisions aimed at stimulating economic growth and simplifying tax codes, it also introduces permanent restrictions on gambling-related deductions that could significantly impact both casual bettors and professional gamblers.
Key Gambling-Related Provisions
1. Permanent Cap on Gambling Deductions
The bill codifies a rule that gamblers may only deduct losses and expenses up to the amount of their winnings. While this limitation already existed under the 2017 Tax Cuts and Jobs Act, the new law makes it permanent and more restrictive.
- What’s included in the cap?
- Wagering losses
- Travel and lodging for tournaments
- Entry fees
- Meals and other operational costs
Example: If a professional poker player earns $50,000 in winnings but spends $70,000 on buy-ins, travel, and lodging, they can only deduct $50,000. The remaining $20,000 in expenses is non-deductible, increasing their taxable income.
Why This Hurts Gamblers
1. Higher Tax Burden for Professionals
Professional gamblers often operate as sole proprietors or independent contractors. Under the new law, they can no longer deduct legitimate business expenses beyond their winnings, even if they operate at a net loss.
- Impact: Increases taxable income in losing years, potentially pushing gamblers into higher tax brackets despite negative cash flow.
2. Discourages Tournament Play
High-stakes tournaments often require significant upfront investment in travel, lodging, and entry fees. With these costs no longer fully deductible, many players may opt out of major events, reducing participation and prize pool sizes.
3. Bankroll Management Becomes Riskier
Gamblers who rely on tax deductions to offset lean years will now face greater volatility in their financial planning. This could lead to:
- Reduced liquidity
- Increased debt risk
- Greater exposure to financial instability
Additional Tax Reporting Changes
Repeal of $600 1099-K Threshold
On a more positive note, the bill repeals the $600 threshold for third-party payment reporting (e.g., PayPal, Venmo), which was set to trigger IRS Form 1099-K for small transactions.
- Impact: Casual gamblers and fantasy sports players who exchange small sums via digital platforms may avoid unnecessary tax paperwork.
Industry Reaction
- Professional gamblers and tax experts have expressed concern that the bill treats gambling as a hobby rather than a legitimate profession.
- Gaming advocacy groups warn that the changes could push more players into unregulated or offshore markets where tax burdens are less severe but consumer protections are weaker.
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Final Thoughts
While the One Big Beautiful Bill may offer tax relief to high-income earners and car buyers, it delivers a clear blow to the gambling community—especially those who treat it as a profession. By limiting deductions and increasing taxable income, the bill could reshape how gamblers approach risk, bankrolls, and tournament play in the years ahead.
