Do I owe taxes if I broke even gambling?

The rule that changed

Under prior law, gambling losses were deductible up to 100% of winnings — so a bettor who won $100,000 and lost $100,000 over the year had zero net taxable gambling income. Starting tax year 2026, under the One Big Beautiful Bill Act (OBBBA), that changes: gambling losses are only deductible up to 90% of gross losses, still capped at total winnings.

That 10-percentage-point gap doesn't disappear — it becomes taxable income, even though the taxpayer didn't actually come out ahead. This is what's often called phantom income: income that exists purely because of how the deduction is now calculated, not because of any real economic win.

The math, worked out

Take a bettor who won $100,000 and lost $100,000 across the year — a true break-even:

Under prior law this same bettor owed $0 in gambling income tax. Under the new rule they owe tax on $10,000 of income they never won — money that came entirely from the 10% haircut on the deduction, not from any real profit.

When phantom income doesn't apply

The 90% cap only bites when losses are large relative to winnings — specifically, when the old-law deduction (capped at winnings) would be bigger than the new 90%-of-losses figure. For a net winner whose losses sit well below winnings, the cap on losses rather than the 90% haircut is usually already the binding constraint, and the new rule changes nothing. Phantom income shows up in break-even and near-break-even situations — which is exactly why high-volume bettors and poker players who reinvest most of what they win are the ones who need this watched closely.

Why this hits high-volume players hardest

A casual bettor with one or two small wins a year barely notices this rule. Someone running action across five, ten, or fifteen sportsbooks — reinvesting winnings, chasing +EV lines, grinding a poker bankroll — can have gross winnings and gross losses that are both large and close together, which is precisely where the 90% cap creates the most phantom income relative to actual profit. The more books and the higher the volume, the more it matters that every win and loss across every book is reconciled rather than estimated.

What a preparer can do about it

The 90% cap can't be undone — it's the law from TY2026. What is controllable is knowing the real number before the return is due, and confirming that every sportsbook, casino, and poker site is actually accounted for, since an incomplete picture distorts the phantom-income math in either direction.

LedgerWager reconciles every win/loss statement, W-2G, and 1099 into one workpaper and computes this exactly rather than by estimate — so the firm signing the return knows the taxable and phantom income figures before filing.