Can You Deduct Sports Betting Losses? Gambling Loss Tax Guide
Yes, you can deduct sports betting losses on your federal tax return, but only if you meet specific conditions. You must itemize your deductions on Schedule A, you can only deduct losses up to the amount of your gambling winnings, and you need documentation to back up your claims. Starting in 2026, the One Big Beautiful Bill Act (OBBBA) adds another restriction: a 90 percent cap on gambling loss deductions that creates taxable phantom income for many bettors.
This guide explains exactly how the gambling loss deduction works, who qualifies, and what changes are coming. For the broader picture of how sports betting is taxed, see our complete sports betting taxes guide.
Important: This guide is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and individual circumstances vary. Always consult a qualified tax professional or CPA for advice specific to your situation. The IRS website (irs.gov) is the authoritative source for current rules.
The short answer: yes, but with conditions
The IRS allows you to deduct gambling losses as an itemized deduction on Schedule A of your federal tax return. However, three critical restrictions apply:
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You must itemize deductions. If you take the standard deduction (which most taxpayers do), you cannot claim gambling losses at all.
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Losses are limited to winnings. You can only deduct gambling losses up to the total amount of gambling winnings you report for the year. You cannot create a net gambling loss on your tax return.
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You need records. The IRS expects documentation to support any gambling loss deduction. Win/loss statements, betting history exports, and personal records all count.
These rules mean that the gambling loss deduction is not as straightforward as many bettors assume. You cannot simply subtract your losses from your wins before reporting income. The IRS treats these as two separate calculations: gambling income on one side, and a potential itemized deduction on the other.
How the gambling loss deduction works
Understanding the mechanics requires separating two distinct tax concepts: income reporting and deduction claiming.
Step 1: Report all gambling winnings as income. Every dollar you win from sports betting is taxable income. This goes on Schedule 1 (Other Income) of your Form 1040. It does not matter if you won the money on straight bets, parlays, futures, or promotional contests. Report the full gross amount.
Step 2: Claim losses as a separate itemized deduction. If you choose to itemize, you list gambling losses on Schedule A under Other Itemized Deductions. This deduction reduces your taxable income but cannot exceed your reported gambling winnings.
The key concept is that these are two independent calculations. You do not net your wins and losses. You report gross gambling income and separately claim a deduction.
Example: You won $12,000 betting on sports and lost $15,000 over the same year. Here is how taxes work:
- Report $12,000 as gambling income on Schedule 1
- If itemizing, deduct $12,000 in gambling losses on Schedule A (limited to winnings)
- The remaining $3,000 in losses provides no tax benefit
- Net taxable gambling income if itemizing: $0
- Net taxable gambling income if taking standard deduction: $12,000
For the step-by-step process of filing these forms, see our guide to reporting sports betting winnings on your tax return.
Schedule A: where gambling losses go on your return
Gambling losses are claimed on Schedule A (Itemized Deductions), which is part of your federal Form 1040. The deduction falls under the category of other itemized deductions.
To claim gambling losses on Schedule A, you need:
- Your total gambling winnings for the year (already reported on Schedule 1)
- Your total gambling losses for the year (supported by documentation)
- A decision to itemize rather than take the standard deduction
The gambling loss deduction is entered alongside other itemized deductions such as mortgage interest, state and local taxes (SALT), charitable contributions, and medical expenses. Your total itemized deductions compete against the standard deduction. You use whichever gives you the larger deduction.
| Schedule A Category | Common Items |
|---|---|
| Medical and dental expenses | Expenses exceeding 7.5% of AGI |
| Taxes you paid | State/local income tax, property tax (SALT cap: $10,000) |
| Interest you paid | Mortgage interest |
| Gifts to charity | Charitable donations |
| Other itemized deductions | Gambling losses (up to gambling winnings) |
How much can you deduct? Understanding the loss limits
The federal limit is straightforward: you can deduct gambling losses up to the total amount of your gambling winnings for the tax year. Not a dollar more.
This rule has several practical implications:
You cannot create a net gambling loss. If you won $5,000 and lost $20,000, your maximum deduction is $5,000. The remaining $15,000 in losses has no tax value.
Excess losses do not carry forward. Unlike business losses or capital losses, gambling losses cannot be carried over to future tax years. If you cannot use them this year, they are gone.
The limit applies to all gambling combined. Your sports betting losses, casino losses, lottery ticket purchases, and poker losses are all pooled together. The same is true for your winnings.
| Scenario | Gambling Wins | Gambling Losses | Max Deduction | Net Taxable (if itemizing) |
|---|---|---|---|---|
| Modest winner | $5,000 | $3,000 | $3,000 | $2,000 |
| Break-even | $10,000 | $10,000 | $10,000 | $0 |
| Net loser | $8,000 | $15,000 | $8,000 | $0 |
| Big loser | $2,000 | $25,000 | $2,000 | $0 |
In every scenario above, the deduction is capped at the amount of gambling winnings. The bettor who lost $25,000 but won only $2,000 can deduct just $2,000. The other $23,000 in losses provides zero tax benefit.
The standard deduction problem: why many bettors cannot deduct losses
Here is the catch that trips up most casual bettors: the gambling loss deduction only helps if you itemize, and most taxpayers do not itemize.
The 2025 standard deduction amounts are:
- Single: $15,000
- Married filing jointly: $30,000
- Head of household: $22,500
To benefit from the gambling loss deduction, your total itemized deductions (including gambling losses, mortgage interest, SALT, charitable giving, and other items) must exceed these thresholds. If they do not, you take the standard deduction and get no tax benefit from your gambling losses.
Example: Sarah is single, rents an apartment (no mortgage), and has no major itemized deductions. She won $8,000 and lost $8,000 betting on sports. Her only potential itemized deduction is the $8,000 in gambling losses, plus $3,000 in state taxes. Total itemized deductions: $11,000. Since this is below the $15,000 standard deduction, Sarah takes the standard deduction and cannot claim her gambling losses. She owes tax on the full $8,000 in gambling winnings.
When itemizing makes sense for gambling losses:
- You have a mortgage with significant interest payments
- You live in a high-tax state (pushing your SALT close to the $10,000 cap)
- You make substantial charitable donations
- Your gambling losses are large enough that combined with other deductions, you exceed the standard deduction threshold
For many recreational bettors who win and lose relatively small amounts, the standard deduction will be the better choice regardless of gambling losses.
OBBBA changes for 2026: the 90 percent loss deduction cap
The One Big Beautiful Bill Act (OBBBA) introduces a significant change to gambling loss deductions starting in the 2026 tax year. Under OBBBA, you can only deduct 90 percent of your gambling losses, even if you have enough winnings to cover the full amount.
Current rules (2025 and earlier):
- Deduct losses up to 100% of gambling winnings
- Break-even bettors who itemize owe $0 in gambling-related tax
OBBBA rules (2026 and later):
- Deduct losses up to only 90% of gambling winnings
- The 10% gap creates taxable phantom income
What is phantom income? Phantom income is taxable income that exists on paper but was never actual profit. Under OBBBA, it is the 10 percent of your gambling losses that you can no longer deduct.
| Scenario | Wins | Losses | 2025 Taxable | 2026 Taxable (OBBBA) |
|---|---|---|---|---|
| Break-even bettor | $20,000 | $20,000 | $0 | $2,000 |
| Slight winner | $15,000 | $12,000 | $3,000 | $4,200 |
| High-volume break-even | $100,000 | $100,000 | $0 | $10,000 |
| Net loser | $30,000 | $40,000 | $0 | $3,000 |
The high-volume break-even bettor is hit hardest. Someone churning $100,000 in bets who breaks even would owe federal tax on $10,000 of phantom income under OBBBA. At a 24 percent marginal rate, that is $2,400 in tax on zero actual profit.
OBBBA makes disciplined bankroll management and betting volume awareness even more important. Use our sports betting tax calculator to model your phantom income risk under different scenarios. For the full breakdown of OBBBA and its implications, see our complete sports betting taxes guide.
Recordkeeping requirements: what the IRS expects
If you claim gambling losses on your taxes, the IRS expects you to substantiate those losses with adequate records. Without documentation, your deduction may be disallowed during an audit.
What records to keep:
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Win/loss statements from every sportsbook you used during the year. Most major apps (DraftKings, FanDuel, BetMGM, Caesars) make these available in January or February.
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Betting history exports. Download CSV or PDF files showing every bet placed, including date, amount, odds, and outcome. This provides granular proof of your losses.
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Form W-2Gs. Keep copies of any W-2G forms received for large wins. These document your reported gambling income.
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Personal betting diary. The IRS has traditionally recommended that gamblers maintain a diary recording each gambling session, including the date, type of wager, location (or app used), amount wagered, and result. While digital records from sportsbooks may satisfy this requirement, a personal log adds an extra layer of protection.
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Bank and payment records. Statements showing deposits to and withdrawals from sportsbook accounts help establish your overall activity level.
How long to keep records:
The IRS generally recommends keeping tax records for at least three years from the date you filed the return. If you underreported income by more than 25 percent, the statute of limitations extends to six years. Many tax professionals recommend keeping gambling records for at least six years.
For a detailed guide on what to track and how to organize your records, see our sports betting recordkeeping guide for tax season.
State-by-state loss deduction rules
Federal rules allow gambling loss deductions, but state rules vary significantly. Your state of residence can dramatically affect your total tax burden.
States that allow loss deductions (mirror federal rules): Most states that tax income follow the federal approach and allow gambling losses to be deducted up to the amount of winnings when itemizing. Examples include New Jersey, Pennsylvania, Colorado, and Arizona.
States that do not allow loss deductions: Several states tax your gross gambling winnings with no offset for losses. This is the most painful situation for bettors. Examples include Massachusetts, Indiana, and Wisconsin.
No-income-tax states: If you live in Texas, Florida, Nevada, Washington, Wyoming, South Dakota, or Alaska, you pay no state income tax on gambling winnings. Only federal taxes apply.
| State Category | Examples | Impact on $20K Wins / $20K Losses |
|---|---|---|
| No income tax | TX, FL, NV, WA | $0 state tax |
| Allows loss deduction | NJ, PA, CO, AZ | $0 state tax (if itemizing) |
| No loss deduction | MA, IN, WI | State tax on full $20K gross wins |
A break-even bettor in Massachusetts with $20,000 in wins and $20,000 in losses would owe approximately $1,000 in state tax (5 percent of $20,000) while a bettor in New Jersey or Florida would owe nothing at the state level.
Starting in 2026, bettors in no-deduction states face a double hit from OBBBA: federal phantom income plus full state taxation on gross winnings. For more on how tax rates vary by state, see our sports betting tax rate guide.
Casual bettor vs. professional gambler: different deduction rules
The IRS distinguishes between casual (recreational) gamblers and professional gamblers, and the deduction rules differ significantly.
Casual bettors (the vast majority of sports bettors):
- Report winnings as other income on Schedule 1
- Deduct losses on Schedule A (if itemizing)
- Cannot deduct gambling-related expenses (subscriptions, travel, data services)
Professional gamblers:
- Report gambling activity on Schedule C as a business
- Deduct losses and business expenses (data subscriptions, equipment, travel)
- Subject to self-employment tax on net gambling income
- Must meet strict IRS criteria to qualify
The IRS uses several factors to determine professional status: regularity of activity, whether it is your primary income source, the time and effort devoted, and whether you operate in a businesslike manner with records and a profit motive.
Most sports bettors are casual gamblers under IRS definitions, even if they bet frequently. The professional gambler classification is narrow and carries its own tax complexities. For a deeper comparison, see our professional gambler vs. casual bettor tax guide.
Common mistakes when deducting gambling losses
Avoiding these errors can save you from IRS trouble and unexpected tax bills.
Mistake 1: Netting wins and losses before reporting. This is the most common error. You must report gross gambling income, then claim losses separately. Do not subtract losses from winnings on Schedule 1.
Mistake 2: Deducting more than your winnings. The IRS will reject any gambling loss deduction that exceeds your reported gambling income. If you won $5,000, your maximum deduction is $5,000, regardless of how much you lost.
Mistake 3: Claiming losses without records. If audited, the IRS will ask for documentation. Without win/loss statements, betting history exports, or a personal log, your deduction may be denied entirely.
Mistake 4: Assuming the standard deduction covers losses. The standard deduction and the gambling loss deduction are not additive. You choose one or the other. If you take the standard deduction, you get no benefit from gambling losses.
Mistake 5: Forgetting state rules. Even if you successfully deduct losses at the federal level, your state may not allow the deduction. Check your state rules before assuming you are covered.
Mistake 6: Ignoring OBBBA. Starting in 2026, the 90 percent cap means even perfect recordkeeping and itemizing will not eliminate your gambling tax burden if you break even or lose. Factor the cap into your tax planning.
Mistake 7: Not tracking across all sportsbooks. If you use five different apps, you need records from all five. Missing one sportsbook can leave gaps in your documentation and make it harder to substantiate your total losses.
Frequently Asked Questions
Can you deduct sports betting losses on your taxes?
Yes, but only if you itemize deductions on Schedule A of your federal tax return. You can deduct gambling losses up to the amount of your gambling winnings for the year. Starting in 2026, OBBBA caps the deduction at 90 percent of winnings. You need documentation such as win/loss statements and betting history to support your claims.
Do you have to itemize to deduct gambling losses?
Yes. Gambling losses can only be claimed as an itemized deduction on Schedule A. If you take the standard deduction (which most taxpayers do), you cannot deduct gambling losses. Your total itemized deductions must exceed the standard deduction ($15,000 single, $30,000 married filing jointly in 2025) for itemizing to benefit you.
Can you deduct more in losses than you won gambling?
No. The IRS limits gambling loss deductions to the amount of gambling winnings you report for the year. If you won $8,000 and lost $15,000, your maximum deduction is $8,000. The remaining $7,000 in losses has no tax value and cannot be carried forward to future years.
What records do I need to deduct sports betting losses?
The IRS expects substantiation of claimed gambling losses. Keep win/loss statements from each sportsbook, betting history CSV exports showing every wager, copies of W-2G forms, bank statements showing sportsbook transactions, and ideally a personal betting diary. Retain these records for at least three to six years. See our recordkeeping guide for details.
How does OBBBA change gambling loss deductions in 2026?
The One Big Beautiful Bill Act caps gambling loss deductions at 90 percent of gambling winnings starting in 2026. Under current rules, you can deduct losses up to 100 percent of winnings. Under OBBBA, the remaining 10 percent becomes taxable phantom income. A break-even bettor with $50,000 in wins and losses would owe tax on $5,000 of phantom income.
Do state taxes allow you to deduct sports betting losses?
It depends on your state. Most states that tax income follow federal rules and allow gambling loss deductions when itemizing. However, some states (Massachusetts, Indiana, Wisconsin) do not allow gambling loss deductions at all, meaning you pay state tax on your full gross winnings. States without income tax (Texas, Florida, Nevada) impose no state gambling tax. Check your specific state rules.
Can I deduct losses from one sportsbook against wins from another?
Yes. The IRS looks at your total gambling activity for the year, not individual sportsbooks. You can combine wins from DraftKings and losses from FanDuel (and vice versa) when calculating your total gambling income and total losses. Keep records from every app you use to document the combined totals.
Should I use a tax professional if I have gambling income?
A tax professional is recommended if you have significant gambling income, multiple W-2G forms, live in a state that restricts loss deductions, or want to ensure you are maximizing your deductions correctly. For smaller amounts, tax software like TurboTax or H&R Block includes gambling income sections that walk you through reporting. For the full filing process, see our guide to reporting sports betting on your tax return.
Responsible Gambling Notice
Sports betting should be entertainment, not a financial strategy. Understanding tax deductions does not change the fundamental reality that most bettors lose money over time. Never increase your betting volume to generate larger loss deductions, as this is a losing strategy both financially and from a tax perspective.
If gambling is causing financial stress or you find yourself betting more than you can afford, help is available. The National Council on Problem Gambling offers confidential support at 1-800-522-4700. Set limits, use sportsbook responsible gambling tools, and keep betting fun.
Gamble responsibly. If you or someone you know has a gambling problem, call +1-800-GAMBLER.
Disclaimer: This article is for general educational and informational purposes only. It does not constitute financial, tax, or legal advice, and should not be relied upon for making tax filing decisions. Tax laws are complex, vary by jurisdiction, and change frequently. The information provided may not reflect the most current legal developments or your specific circumstances.
Before filing your taxes: Always consult with a qualified tax professional, certified public accountant (CPA), or licensed tax preparer who can review your complete financial situation. For authoritative and up-to-date guidance, refer to the IRS website at irs.gov and your state department of revenue.
Accuracy: While we strive to provide accurate information, OddsIndex makes no warranties or representations regarding the accuracy, completeness, or applicability of the content.
Last updated: January 2026
