FULL HOUSE Act Limits Gambling Loss Deductions Starting 2026: What It Means for Your Tax Bill

The aptly named Facilitating Useful Loss Limitations to Help Our Unique Service Economy Act, or FULL HOUSE Act, isn’t about regulating casinos or online betting. Instead, it’s a tax bill with one specific, impactful goal: changing how you can deduct gambling losses on your federal taxes starting in 2026. Currently, if you gamble, you can deduct your losses up to the amount of your winnings. This bill doesn’t change that basic rule, but it clarifies and tightens the screws on what exactly counts as a deductible loss, ensuring you can only use gambling losses to offset gambling winnings—and nothing else.

The Fine Print: Winnings vs. Losses

Section 2 of the FULL HOUSE Act is pretty straightforward, but the real-world impact is significant for anyone who enjoys recreational betting. The rule, effective for tax years after December 31, 2025, states that you can only deduct losses from gambling up to the amount you actually won gambling that year. Let’s say you hit a jackpot for $5,000 but, over the course of the year, you actually lost $8,000. Under this new rule, you can only claim $5,000 in losses, meaning you’ll still pay tax on the $5,000 you won, even though you ended the year $3,000 in the hole. Before this change, the IRS has had some wiggle room in interpreting what falls under the umbrella of 'gambling activities' for tax purposes. This bill makes it crystal clear: you can’t use those net losses to lower your taxable income from your day job, your side hustle, or any other non-gambling source.

The Real-World Tax Hike for the Recreational Gambler

So, who really feels this change? It’s the person who treats gambling as a hobby, not a business. If you’re a software developer making $100,000 a year, and you spend your weekends at the track or casino, you might be used to deducting your losses to lessen your overall tax burden. If you win $10,000 but lose $15,000, you’ve sustained a net loss of $5,000. Under the FULL HOUSE Act, you’ll still report the $10,000 in winnings and deduct $10,000 in losses, netting zero on the gambling front. However, you cannot use that remaining $5,000 net loss to reduce your $100,000 taxable income from your job. This effectively increases the tax burden on your earned income, because you are no longer able to use those losses to offset it. This provision essentially ensures that the federal government collects taxes on all gross gambling winnings, even if the taxpayer is a net loser for the year.

Why the Change? Closing the 'Loophole'

The intent here is clearly revenue generation. By tightening the definition of deductible losses, the federal government anticipates collecting more tax dollars from individuals who currently use gambling losses to reduce their overall taxable income. While the bill text is lean and avoids complex definitions, the practical effect is a restriction on a deduction that taxpayers previously had access to. It makes the tax code stricter for those who sustain net losses but have other income streams. If you’re one of the few who manages to treat gambling as a full-fledged business and meet the strict IRS criteria for doing so, your situation might be different, but for the vast majority of recreational players, this change means a higher tax bill starting in 2026.