Tax Consequences of Gambling: Professional vs. Nonprofessional, OBBBA Changes, Expense Deductions

This webinar will explain the rules surrounding reporting gambling income, deducting gambling expenses, and incorporating recent tax legislation in planning for taxpayers who receive wagering income. Our panel of federal tax veterans will suggest strategies to mitigate taxes for individuals who participate in games of chance.

As defined by the IRS, "Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos." The popularity of games of chance, including poker, slots, fantasy sports, and online gambling, has led to increased tax reporting of these activities. Whether for pleasure or a line of business, the tax implications of gambling activities are unique and complex. 

There are distinct differences in the taxability and reporting of gambling income and expenses for professional and casual gamblers. Prior to TCJA, taxpayers whose trade or business was gambling could deduct ordinary and necessary business expenses in excess of gambling income, creating a tax loss. The TCJA, however, limited the deductions allowed to the amount of income from these activities. Under the OBBBA, this provision was made permanent. As an added complication, OBBBA also limits losses from "wagering" transactions to 90%. 

Further complexities include the requirement to report gambling winnings on Form W-2G. Historically, the thresholds for reporting gambling winnings have varied for keno, slot machines, and poker tournaments. Recently released instructions for the draft Form W-2G state, "The minimum threshold amount for payments made in calendar year 2026 is $2,000." Participants in gambling activities and their advisers need to understand the taxation of these winnings and the recent impact of OBBBA on these activities.

Listen as our panel of individual income tax experts explores the taxation of gambling income, the related deductions, and the effect of OBBBA on gamblers.