Gambling and sports betting: winnings, losses, and the 2026 change

Gambling winnings are fully taxable, including the fair market value of a car or a trip you win. Losses only reduce the tax if you itemize, and from 2026 only part of them counts.

What changed for 2026

Under the rule that applies from 2026, the itemized deduction for gambling losses is limited to 90% of the losses for the year, and it still cannot be more than the winnings you reported. The January 2026 revision of Form W-2G states it in the instructions the payer hands the winner.

The practical effect is easy to miss and expensive to discover. A bettor who ends the year exactly even now reports all of the winnings and can deduct only most of the losses, so a break-even year produces taxable income. Losses no longer cancel wins even for someone who itemizes.

Everything you win is income

Gambling income includes winnings from lotteries, raffles, sports betting, horse races and casinos. It includes cash and it includes the fair market value of prizes such as cars and trips, valued at what the prize is worth rather than at what you paid to enter.

None of that depends on a form arriving. The reporting obligation belongs to the payer and the tax obligation belongs to you, and the two are set by different rules. An app that never sends you anything has not made the winnings tax-free.

When a Form W-2G arrives

A payer issues Form W-2G if you receive certain gambling winnings, or if any of your winnings are subject to federal income tax withholding. The threshold that triggers the form differs by type of game, and those thresholds are now adjusted for inflation each year rather than fixed, so the right question is what the applicable reporting threshold is for that game in that year. Across the information returns the IRS adjusts this way, the minimum threshold for payments made in calendar year 2026 is $2,000.

Withholding runs on its own numbers. Regular gambling withholding applies at 24% when the winnings minus the wager exceed $5,000 on a sweepstake, a wagering pool, certain parimutuel pools, jai alai, a lottery or a sports wager. Backup withholding applies at that same rate where the winner does not give a correct taxpayer identification number and the winnings meet the applicable reporting threshold. For wagers of the kind measured against the odds — those where reporting also requires winnings of at least three hundred times the wager — backup withholding covers the range up to the regular withholding threshold, above which regular gambling withholding takes over instead.

Where the winnings go

Winnings are reported on the other income line of Schedule 1, whether or not a Form W-2G was issued for them. Any federal income tax withheld from the winnings goes in with your other tax already paid, alongside the withholding from a paycheck, which is the part that softens the bill in April. How refunds work sets out how paid-in tax turns into a refund or a balance due.

Losses: the two gates and now a third

Gate one is that you must itemize deductions on Schedule A. For anyone who is not in the trade or business of gambling, there is nowhere else on the return to put the losses, so a filer taking the standard deduction gets nothing for them, no matter how carefully they were recorded. Someone whose gambling is a trade or business reports the activity on Schedule C instead, which is a different return altogether and a question for a preparer. Standard or itemized is the decision that comes first.

Gate two is that the deduction cannot exceed the gambling income you reported. Gate three is the 2026 limit above. Read together, the three of them mean the deduction is worth something only to an itemizer, only up to the winnings, and now only for part of the losses.

The session record

The deduction survives on records, and the IRS asks for an accurate diary or similar record of winnings and losses, backed by receipts, tickets, statements or other records showing both amounts. Keep it by session rather than by year: the date, the place, the type of wager, the amount in, the amount out, and who was with you.

The modern version of that is to download each app's annual statement and keep your own log as well. A statement is one operator's view of one account, and most bettors have more than one account. The log is also what lets you answer a question about a single evening two years later, which a yearly total never will.

The traps

Netting the year in your head is not what the return does. Winnings and losses go in different places on it, one as income and one as an itemized deduction, and the gap between those two places is where the tax appears even for someone who came out level.

A car or a trip is taxed on its fair market value in the year you win it, so the cash to pay that tax has to come from somewhere other than the prize. Winners of large non-cash prizes sometimes find that out in April.

And a nonresident alien of the United States who is not a resident of Canada generally cannot deduct gambling losses at all. For that reader the winnings are the whole story, and the record-keeping above changes nothing.