House Passes Big Beautiful Bill Without Changes; Gambling Deduction Cap Set to Become Law

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Casino companies and the gambling industry in the United States, as represented by the American Gaming Association (AGA), do not support the recently enacted provision in the One Big Beautiful Bill Act (OBBB) that limits the deductibility of gambling losses. While the AGA initially praised the overall legislation for its corporate tax benefits, they have since expressed strong opposition to this specific change and have actively backed efforts to restore the full deduction of gambling losses.
Here's a breakdown of the industry's stance:
  • Initial Support for the Bill (OBBB): The AGA initially supported the broader OBBB legislation, citing provisions that would benefit the industry, such as lower corporate taxes and an increase in the slot machine jackpot reporting threshold.
  • Opposition to the Deduction Limit: Despite supporting the overall bill, the AGA and many industry stakeholders are strongly against the provision that limits the deduction of gambling losses to 90% of winnings. This change means that even gamblers who break even or incur a net loss could owe taxes, a situation that the industry views as unfair and potentially damaging.
  • Concerns about "Phantom Income": The industry raises concerns about the concept of "phantom income," where gamblers might be taxed on winnings even if their overall gambling activities result in a net loss for the year.
  • Fears of Driving Activity Offshore: A significant concern is that the new deduction limit could push gamblers, particularly high-volume or professional gamblers, away from regulated casinos and online platforms towards unregulated and illegal betting markets, including offshore sites. This could lead to a decline in casino revenues, negatively impacting jobs and local economies.
  • Support for the FAIR BET Act: The AGA has publicly backed the FAIR BET Act, a bill introduced to restore the 100% deduction for gambling losses, according to CDC Gaming. They are working with lawmakers to try and reverse the deduction limit before it takes effect on January 1, 2026.
 
Yes, the $1,200 gaming tax threshold for slot machine winnings has been increased.
The recently signed "One Big Beautiful Bill Act" (OBBBA) includes a provision that raises the threshold for reporting slot machine winnings from $1,200 to $2,000. This change is set to take effect on January 1, 2026.
While this is seen as a positive step by the American Gaming Association and others who have advocated for an increase to reflect inflation and ease the burden on casinos and players, some believe it's not enough.
Notably:
  • The IRS Advisory Council had recommended raising the threshold even higher, to over $5,000 and indexing it to inflation.
  • Some are also advocating for further increases to the threshold, potentially up to $5,000.
  • Beginning in 2027, the $2,000 limit will be adjusted annually based on inflation, according to Action Network.
 
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