Tax Tip #261

Prior to the Big Beautiful Bill, gambling losses were limited to gambling winnings.

Example 1: If a taxpayer wins $900 but lose $1,000, the taxpayer can claim losses of $900. However, if the taxpayer cannot itemize and takes the standard deduction, then the taxpayer pays tax on the winnings with no offset from any losses. 

Example 2:If a taxpayer wins $900 and loses $1,000, the taxpayer can claim losses of $900. If the itemized deductions, which includes gambling losses, are greater than the standard deduction, the taxpayer pays no tax on the $900 of winnings.

Starting in 2026 under the Big Beautiful Bill BBB, losses are limited to 90 percent of winnings. 

Example 3: If a taxpayer wins $900 but loses $1,000, the taxpayer can claim losses of $810. However, if standard deduction is greater than itemized deductions, there is no benefit from the losses, and the taxpayer pays tax on the $900 of winnings. 

Two items to note — NJ will still permit 100 percent offset. The rules for professional gamblers differ from what is described in this tip.

Have questions about the Big Beautiful Bill? Contact a team member for more information.