In the wake of the House Rules Committee blocking the FAIR Bet Act, new legislation has already been introduced to repeal the new gambling tax law.
H.R. 6985 is a new bipartisan House bill that would fully roll back the 90% cap on gambling loss deductions created by President Donald Trump’s One Big Beautiful Bill Act (OBBBA), restoring the long-standing ability to deduct 100% of gambling losses against winnings.
The new gambling tax went into effect on New Year's Day and is already having a significant impact on the entire industry, from professional gamblers to casinos.
Let's take a closer look at the details of the proposed H.R. 6985 bill, which was drafted as a mirror of the Senate’s FULL HOUSE Act, and why it matters to the gambling community.
What H.R. 6985 Will Change
H.R. 6985 is a bipartisan bill that seeks to amend the Internal Revenue Code by restoring the full deductibility of gambling losses against winnings.
The primary change would be the removal of the 90% cap imposed by the OBBBA.
Under the current new gambling tax law, a gambler can only deduct 90% of their losses, potentially creating taxable income even for those who end up breaking even. For example, if a gambler wins $1,000 and loses $1,000, they can only deduct $900, leaving $100 as taxable income. This has been labeled as "phantom income" by critics and is seen as an unfair burden on taxpayers.
By restoring the 100% deduction of gambling losses, the bill aims to eliminate this phantom income and provide tax fairness to gamblers. This move is especially important for states with significant gaming economies like Nevada.
The Problems With the Current New Gambling Tax Law
The changes brought about by the OBBBA are set to begin affecting taxpayers with the 2026 returns.
Under these new rules, gamblers in states where gaming is an essential part of the economy, such as Nevada, could face significant financial disadvantages. Critics argue that the current new gambling tax law effectively taxes non-existent income and could dampen tourism by making gambling less attractive to both casual and professional players.
Rep. Steven Horsford (D-NV) and Rep. Max Miller (R-OH), the sponsors of H.R. 6985, have voiced concerns about the potential negative impacts on state economies tied to gaming. They argue that it's unfair to tax individuals on earnings that are, in reality, canceled out by losses.
“Taxing people on money they never actually earned is fundamentally unfair and harmful to Nevada’s economy,” said Congressman Horsford. “This policy would drive tourism across our state. There is strong bipartisan agreement that this provision was a mistake, and Congress must act to correct it.”
“The FULL HOUSE Act is about basic fairness in the tax code,” said Congressman Miller. “Americans should not be taxed on money they didn’t actually take home. By restoring the full deduction for gambling losses, this bill ensures the IRS treats taxpayers honestly and consistently. I’m proud to lead this bipartisan effort with Congressman Horsford, and I urge my colleagues to support this common-sense fix.”
But everyone is not on board. A prominent member of the Senate Finance Committee, Senator James Lankford (R-OK), openly opposed efforts to reverse the new gambling tax policy.
The Legislative Path Forward
H.R. 6985 has garnered support from both sides of the aisle—demonstrating the nationwide concern over the potential consequences of the new gambling tax law.
In the Senate, the FULL HOUSE Act, a companion bill to H.R. 6985, has been introduced by Senators Ted Cruz (R-TX) and Catherine Cortez Masto (D-NV) alongside other sponsors, further illustrating the cross-party effort.
The bill has been met with optimism, partly due to its bipartisan backing, a factor that previous attempts like the FAIR BET Act lacked. As of now, it remains with the House Committee on Ways and Means. If passed, it would be applied retroactively to the 2026 tax year, preventing the 90% cap from taking effect.
The introduction of H.R. 6985 marks an important step in addressing the concerns surrounding the new gambling tax law.
By potentially repealing the 90% cap on gambling loss deductions, the bill seeks to protect taxpayers from unfair taxation and support states that rely heavily on the gaming industry. As the legislative process unfolds, stakeholders and observers continue to watch closely, hoping for a resolution that favors fairness and economic stability.
In the world of gambling, the new gambling tax law can make a huge difference for both casual bettors and high-stakes players.
