Is the IRS Stealing From Gamblers? The FULL HOUSE Act Seeks Answers
Steven Horsford and Max Miller Lead Bipartisan Fight for Fair Gambling Taxes
For decades, the American tax code operated on a principle that even the most frustrated bettor could understand: you only pay for what you actually take home. If you walked into a sportsbook and won ten thousand dollars but walked out having lost the same amount throughout the year, the Internal Revenue Service saw a wash. That basic logic was upended with the implementation of the One Big Beautiful Bill Act, a massive piece of legislation that has essentially turned the IRS into a house that always wins, even when you do not. Under the new rules that took effect on January 1, 2026, gamblers are now restricted to a 90% deduction on their losses, a move that has effectively manufactured income out of thin air.
This legislative quirk has created what experts are calling phantom income, a financial ghost that haunts anyone who spends significant time at the windows or on betting apps. To combat this, a bipartisan group led by Congressmen Steven Horsford and Max Miller introduced the FULL HOUSE Act to restore the 100% deduction. The argument from the sponsors is simple: taxing citizens on money they never earned is fundamentally unfair and threatens the economic stability of tourism hubs like Las Vegas and the growing sports betting markets across the country.
IRS Gambling Loss Deduction Limits Hit Professional Bettors Hardest
While the casual fan might not notice a few percentage points of difference on a small parlay, the math becomes devastating for high-volume players and professionals. If a professional bettor generates five million dollars in winnings but incurs five million dollars in losses to get there, they have effectively made nothing. However, the current tax code ignores five hundred thousand dollars of those losses. This means the bettor is suddenly liable for taxes on a half-million dollars of profit that only exists on a government spreadsheet. It is an accounting fiction that could bankrupt those operating on thin margins, yet it remains the law of the land unless Congress intervenes.
The Facilitating Useful Loss Limitations to Help Our Unique Service Economy Act, more commonly known as the FULL HOUSE Act under H.R. 6985, seeks to amend Section 165(d) of the Internal Revenue Code. By reinstating the original wording, the bill would ensure that losses from wagering transactions are once again allowed to the full extent of the gains from such transactions. The push for this change is not just about helping gamblers win more; it is about ensuring the tax code reflects the actual economic reality of the industry.
Catherine Cortez Masto and Ted Cruz Sponsor Senate Version of FULL HOUSE Act
The movement to fix this tax blunder is not limited to the House of Representatives. In the Senate, Catherine Cortez Masto and Ted Cruz have joined forces on S. 2230, a companion bill that mirrors the House effort. Seeing a Nevada Democrat and a Texas Republican align so closely on a tax issue highlights just how egregious the current 90% cap is viewed by those in the know. They recognize that the “haircut” on losses does more than just collect revenue; it actively discourages legal, regulated participation in the gaming industry and pushes bettors toward offshore markets where the IRS cannot see their slips.
Beyond the professional circles, the 90% limit also catches recreational bettors who find themselves on a lucky streak early in the year only to give it back later. Under the current regime, even if you finish the year down a few hundred bucks, you could still owe the government a piece of your “winnings” because you cannot write off enough of those losses to break even in the eyes of the tax man. It is a punitive system that treats every loss as a partial win for the federal treasury, and the clock is ticking for lawmakers to pass a retroactive fix before the 2026 filing season arrives.
OBBBA Tax Changes Create New Hardships for 2026 Tax Year
The underlying issue stems from a last-minute provision tucked into the OBBBA, which many believe was inserted without a full understanding of its impact on the gaming sector. While the bill aimed to simplify reporting by raising the 1099-MISC threshold to two thousand dollars, the loss deduction cap has had the opposite effect, complicating the lives of millions of Americans who now have to account for taxable income they never received. The bipartisan coalition currently fighting for the FULL HOUSE Act remains hopeful that the common-sense nature of the bill will carry it through the committee phase and onto the floor for a vote.
The stakes are high for everyone involved, from the sportsbook operators to the individual players. If the tax code is not corrected, the United States risks seeing a significant decline in domestic betting handle as the cost of doing business becomes too high for the average consumer. For now, the betting community is left watching the halls of Congress, hoping that the deck is not permanently stacked against them by a tax law that refuses to acknowledge when someone has actually lost.
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