Wednesday’s federal government shutdown has become Congress’ No. 1 priority, dealing another blow to legislation that would reinstate a 100% gambling loss tax deduction.
- Federal shutdown halts progress on a bill to restore 100% gambling loss deductions.
- Current law reduces deductions to 90% in 2026, potentially costing the industry billions.
- Bipartisan proposals exist but remain stalled amid congressional gridlock and shutdown delays.
Republicans and Democrats remain at an impasse as of the second day of the shutdown with little indication either side is near the votes necessary to restore the federal government back to full operations. In the meantime, any other legislative action, including comparatively minor bills such as the gambling tax provision, remain stalled.
The shutdown has no timeline. Gamblers, and the larger industry, know the tax changes will take effect in less than three months without a bill passed by both the House and Senate.
Each passing day decreases the odds such a bill passes.
Gambling and the One Big Beautiful Bill Act
Included in the sweeping One Big Beautiful Bill signed into law earlier this year was a provision that reduced the 100% deduction for taxpayers that itemizes their gambling losses against their wins down to 90%. Included late in the legislative process as a way to generate around a billion in revenue to offset some of the trillions in tax cuts, the provision has alarmed the larger gambling community.
A hypothetical gambler that won $1 million in 2025 and lost $1 million could deduct 100% of the losses against the wins, thereby paying $0 in taxes. Beginning in 2026, that same gambler could only deduct 90% of their losses against their wins, meaning they would owe taxes on $100,000 of income they didn’t make.
This directly impacts a relatively small subset of taxpayers that itemize and claim gambling deductions. It could have a massive impact on the industry overall.
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Gamblers that itemize are far more likely to be among the highest-spenders. Facing a far larger tax burden, these gamblers may be less likely to play at legal, U.S. casinos, depriving casinos, as well as state and local governments, of significant revenues and taxes.
This could trickle down to smaller players. Casinos could look to make up for the lost revenues with higher minimums, fewer game options, less beneficial odds, lowered comps, or reduced service.
This would then lead to reduced gambling among all income groups. Some analysis project the 90% deduction change could lead to as much as $50 billion in annual handle loss for the overall gaming industry.
Lawmakers’ response
Members of both chambers and both parties have decried the OBBB’s “phantom” tax on gambling. That hasn’t resulted in corresponding action.
Nevada Rep. Dina Titus, whose district includes part of the Las Vegas Strip, has led efforts to restore the 100% deduction, introducing a bill shortly after the OBBB was signed into law July 4. Republican Rep. Jason Smith of Missouri, who chairs the powerful Ways and Means Committee that currently has oversight of the bill, gave his tacit endorsement to Titus’ proposal a few weeks later.
Despite adding more than a dozen bipartisan cosponsors since July, the bill has not received a vote in committee, the first step in a long process that requires approval from both the full House and Senate. Titus attempted to include it as one of over 1,000 amendments to an unrelated defense spending bill, but it was not taken up.
Kentucky Rep. Andy Barr, a Republican, has introduced a parallel bill that could face better odds in the GOP-controlled Congress. It has not received a vote.
In the Senate, Democratic Nevada Sen. Catherine Cortez Masto’s push for a unanimous consent vote on companion legislation to Titus’ bill was rejected. Despite GOP support, the Senate version likewise made no progress.
All these proposals have stagnated as Congress prioritizes a host of other legislative priorities and now the government shutdown.
The gambling tax restoration bill now waits for the two parties to reach a solution that reopens the government. Until then, there is no realistic chance the tax provision advances in Congress.
And even then, it seems increasingly unlikely it would pass before the 90% deduction threshold takes effect Jan. 1.
