When you think of a professional gambler, you might imagine someone lounging at a felt-topped table, sunglasses shielding their eyes from suspicion, chips stacked high in front of them. These figures, often mythologized in movies and novels, walk a precarious line between glamour and ruin. But behind the mystique lies a simple truth: they’re working just like the rest of us, albeit in a far riskier environment. And starting next year, that environment is set to become even more perilous—not because of bad beats or unlucky cards, but thanks to changes in tax legislation.

Luck, Skill, and the Tax Man

In the world of professional gambling, every edge matters. Players dedicate countless hours to studying strategy, probabilities, and human psychology. Whether it’s blackjack, poker, sports betting, or horse racing, the professionals know they’re not merely tossing coins into a wishing well. They are, in essence, small business owners, operating within tight margins and constantly looking for ways to maximize their return on investment.

Up until now, the U.S. tax code recognized this by allowing professional gamblers to deduct 100% of their gambling losses against their winnings. If a player won $100,000 but also lost $100,000, their tax liability would be zero. This principle, at least in theory, aligned with the logic of taxing net income rather than gross receipts. After all, you wouldn’t tax a retailer on their total sales without allowing deductions for the cost of goods sold.

But under a little-noticed provision in the new sweeping tax overhaul, this balance is set to shift. Starting in 2026, gamblers will only be able to deduct 90% of their gambling losses. That sounds minor on the surface—a mere 10% change—but for many, it’s a monumental alteration that threatens the very viability of gambling as a profession.

The Mechanics of the Change

Let’s break this down with a hypothetical scenario. Imagine a professional poker player who wins $500,000 in a year but also suffers $500,000 in losses. Under the current tax regime, they owe nothing in taxes since their net income is zero. Starting in 2026, however, that player would only be able to deduct $450,000 of their losses, meaning they’d report a taxable income of $50,000 despite not having actually “made” any money.

In effect, this law introduces a phantom tax liability. Gamblers could theoretically finish the year with no net gain—or even a net loss—and still owe the IRS. This situation is almost unthinkable in other professions. Imagine a freelance designer being taxed on invoices they issued without being able to deduct the cost of their software or equipment. Or a farmer being taxed on gross crop sales without deducting the costs of seeds, fertilizer, and machinery.

The Rationale: Closing Loopholes or Closing Doors?

Why make this change at all? Lawmakers have framed the provision as an effort to “simplify” and “streamline” deductions, arguing that the current system invites abuse. There’s a perception that casual gamblers might inflate losses to offset their tax burden or that the full deduction allows high-stakes players to manipulate the system.

However, many tax experts and professional gamblers argue that the change punishes legitimate earners. Unlike casual bettors, professional gamblers rely on their activity as their primary income source. Their ability to deduct losses is not a loophole but a necessary acknowledgment of their business expenses.

Moreover, this change may inadvertently push gamblers underground, encourage tax evasion, or force some to move abroad. It could also deter newcomers from attempting to turn professional, thereby diminishing the pool of skilled players who contribute to the economy through travel, hospitality, and tournament fees.

A Precarious Profession, Now More Precarious

Professional gambling is already a financially volatile career choice. There is no guaranteed paycheck, no employer-provided health insurance, and no 401(k) matching contributions. Instead, there are long stretches of losses, psychological stress, and the constant threat of going broke.

Adding a new tax burden on top of this volatility could push many players over the edge. Those who operate on thin margins might find themselves unable to continue, while others might be forced to take on higher risks to offset their increased tax liability. The result? A potential uptick in dangerous betting behaviors, further destabilizing the gambling ecosystem.

The Broader Economic Impression

Professional gamblers do not exist in isolation. They travel extensively, patronize hotels and restaurants, and buy into high-profile tournaments that generate revenue for host cities. Las Vegas alone welcomes millions of visitors annually, with professional gamblers and the events they frequent driving a significant chunk of that economic activity.

If a sizable portion of professional gamblers curtail their activities or leave the country to avoid unfavorable tax treatment, local economies that depend on gambling tourism could feel the ripple effects. Casinos, card rooms, and sports books might also see declining participation, impacting their bottom lines and, by extension, tax revenues for states that rely heavily on gaming income.

An Uneven Playing Field

One of the more concerning aspects of the new tax provision is the uneven playing field it creates. Recreational gamblers—those who do not declare gambling as their profession—are already limited in how they deduct losses. For them, gambling is considered a hobby, and hobby losses can only be deducted against hobby winnings. However, professional gamblers have always been recognized as operating a trade or business, akin to a day trader in stocks or a professional athlete.

By restricting deductions to 90%, the line between professional and recreational blurs in a way that is both legally and philosophically problematic. It implies that the government no longer recognizes professional gambling as a legitimate business, despite its undeniable economic contributions and the specialized skill it requires.

Looking Abroad: Lessons and Warnings

Other countries have taken different approaches to taxing gambling winnings. In the United Kingdom, for example, gambling winnings are entirely tax-free, regardless of whether the individual is a professional or casual player. The rationale is simple: taxing luck-based winnings is viewed as impractical and unfair. The government instead taxes the gambling operators through duties and licensing fees.

While this approach has its critics, it avoids penalizing individuals for engaging in an activity that is fundamentally unpredictable. The U.S., by contrast, treats gambling winnings as ordinary income, which makes sense up to a point—until deductions are curtailed in ways that ignore the realities of the business.

Japan, another major gambling hub, imposes strict regulations on gambling activities but does not tax most individual winnings directly. Instead, it focuses on regulating operators and controlling the flow of money to prevent problem gambling.

The Human Toll

Beyond the economic calculus lies the human cost. Professional gamblers often endure social stigma, even as they pursue their craft with the same dedication and rigor as any high-level professional. Friends and family might view their lifestyle as reckless or unserious, and society at large often sees them through a lens of moral judgment.

Now, they face an additional burden—one that could lead to unexpected financial crises, legal battles with the IRS, and mental health struggles. Stories of professional gamblers losing everything are already common; adding an unavoidable tax bill on top of a losing year could push vulnerable individuals to the brink.

Possible Paths Forward

Some industry advocates and tax attorneys are already lobbying for revisions or clarifications to the new law. They argue for a return to 100% deductibility or, at minimum, a more nuanced approach that recognizes professional gambling as a business with legitimate operating expenses.

Other proposed solutions include allowing gamblers to carry forward losses to future tax years, similar to how capital losses work for investors. This approach would prevent a one-year downswing from creating an irrecoverable tax liability, instead smoothing out tax obligations over time.

There is also discussion of creating a separate tax category for professional gamblers, akin to the treatment of professional athletes or artists, who face irregular income streams and often qualify for income averaging or special deductions.

The Final Bet

The image of a confident player pushing chips across a blackjack table is seductive, embodying the thrill of risk and reward. But as the new tax law demonstrates, even the boldest bet can be upended by forces beyond a gambler’s control.

Professional gamblers will need to adapt, much like they do at the table—calculating odds, managing risk, and adjusting strategy in real time. For some, this new tax burden might be the final straw, pushing them into retirement or forcing them to reinvent themselves in other professions. For others, it may simply become another line item in an already complex ledger.

In the end, the biggest winner might not be the house, nor the players—but the tax man, standing quietly at the edge of the table, ready to collect his cut.

No comments yet.