The WAGER Act of 2025 simplifies the statutory language regarding the existing limitation on deducting gambling losses for tax purposes, effective for tax years beginning after December 31, 2025.
Garland "Andy" Barr
Representative
KY-6
The WAGER Act of 2025 simplifies the statutory language regarding the deduction of gambling losses for federal tax purposes. This amendment clarifies the existing rule that limits the deduction of gambling losses to the amount of gambling winnings. This change will take effect for tax years beginning after December 31, 2025.
WAGER Act of 2025 Cleans Up Tax Code: No Real Change to Gambling Loss Deductions
The WAGER Act of 2025—officially the Winnings And Gains Expense Restoration Act—is less about changing the rules of the game and more about cleaning up the rulebook itself. This bill is a classic example of legislative housekeeping, targeting the language in the Internal Revenue Code (IRC) that deals with how you claim gambling losses on your taxes.
The Fine Print Cleanup: What’s Actually Happening
If you’ve ever had to file a Schedule A or dealt with the complexities of tax deductions, you know the IRC can be a dense jungle of paragraphs. This bill, specifically Section 2, takes aim at Section 165(d)(1) of the IRC, which governs gambling loss deductions. Currently, the law is pretty wordy about stating the obvious: you can only deduct your gambling losses up to the amount of your gambling winnings. You can’t use losses to offset your salary, your business income, or anything else.
The WAGER Act strikes out the old, lengthy explanation of this limitation and replaces it with a simple statement that the deduction for gambling losses “shall be allowed.” While that sounds like a big change, it’s purely a stylistic simplification. The core rule—that losses are limited to winnings—is implied to remain completely intact. Think of it like taking a long, confusing instruction manual and replacing a paragraph with a single, clear sentence that means the same thing.
Why This Matters (and Why It Doesn't)
For the average person who occasionally buys a lottery ticket or hits the casino once a year, this bill changes absolutely nothing about how you file your taxes. If you won $5,000 but lost $8,000, you can still only deduct $5,000 of those losses. Your taxable income from other sources remains untouched by the $3,000 you lost beyond your winnings. The bill is simply making the statutory text tidier for tax professionals and the IRS.
This change isn't going into effect immediately, either. If you’re filing your 2024 taxes next spring, you’ll use the current rules and the current statutory language. The WAGER Act’s simplification only applies to tax years starting after December 31, 2025. In short, this bill is a technical adjustment that confirms the existing tax reality: the house always wins, and the government still limits your deductions.