President Donald Trump said he'll consider repealing a federal tax on gambling winnings, which would work to create the opposite effect of a change included in his Big Beautiful Bill.
Key Takeaways
- Trump’s Big Beautiful Bill limited gamblers’ ability to deduct losses.
- Eliminating the winnings tax would help winning bettors, but not losers.
- The American Gaming Association claimed 60% of American adults gambled last year.
One of the most controversial pieces of Trump’s One Big Beautiful Bill Act was a change that reduced gambling loss deductions from 100% to 90% of losses. That means individuals would owe taxes even in losing years, and winning years could still become net negatives.
Despite making it harder for gamblers to deduct losses, the President has now said he will consider stripping the charge on winnings as part of a continued overhaul of the American tax system.
“We have no tax on tips, we have no tax on Social Security, and we have no tax on overtime,” Trump said in response to a question from a reporter aboard Air Force One on Tuesday, per Fox Business. “No tax on gambling winnings? I don't know. I'm gonna have to think about that.”
The elimination of taxes on tips and overtime was included in the Big Beautiful Bill, meaning that there is a precedent in place.
Trump also recently suggested he could eliminate income taxes, which was met with an array of opinions from policymakers, officials, and economic analysts.
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Following the money
To understand the impact of Trump’s changes, imagine that a single filer makes $100,000 in annual income. They gamble $10,000 and win $11,000 for a $1,000 profit over the year.
Prior to the Big Beautiful Bill, that person would be responsible for paying $14,382 in taxes, leaving them with $86,618. Under the current structure, that individual would pay $14,622 in taxes, giving them a year-end total of $86,378.
If the federal gambling winnings tax is eliminated, that person would pay $14,142 in taxes, resulting in $86,858 in leftover funds.
The difference between the current structure and one without a federal tax on winnings is only 0.6%, using the scenario above. However, an individual’s total income, winnings, and losses would drastically impact that calculation.
The change would only have a positive impact on individuals who won more than they lost. Losing bettors wouldn’t receive the benefit of repealing the tax on winnings since they wouldn’t have enough winnings to offset losses.
Gambling is big business
Nearly 60% of American adults gambled at least once in the past year, according to the American Gaming Association. That includes 30% who visited a retail casino and 21% who bet on sports.
A W-2G form for gambling winnings is assigned to anyone who wins at least $600 in a given year. There’s also a 24% regular withholding rate for individuals with $5,000 or more in yearly gambling winnings.
