Trump’s Big Beautiful Bill explained: summary of how it’ll affect gambling tax and when it’ll go into effect

For anyone watching US politics closely, you’ve probably seen that President Donald Trump is facing criticism for introducing a massive 900-plus-page piece of legislation called the One Big Beautiful Bill Act. The Big Beautiful Bill could make it harder for people who rely on gambling for their income.

On Thursday (July 3), the US House of Representatives passed the Big Beautiful Bill. One key change tucked into it affects betting laws by limiting gambling loss deductions to 90% instead of the full 100% in any given year. Experts have told ReadWrite this cap could have big consequences for both casual gamblers and professionals.

Before we get into the details, here’s what we know so far about the One Big Beautiful Bill:

What is the real name of the Big Beautiful Bill?

The One Big Beautiful Bill Act, also known by acronyms like OBBBA, OBBB, or just the Big Beautiful Bill, is a budget reconciliation law passed by the 119th United States Congress. It includes tax and spending policies that are central to President Donald Trump’s second-term agenda. He signed it into law on July 4, 2025.

But not everyone is on board with it. Democratic Representative Dina Titus from Nevada has been one of its vocal critics. She’s promised to push for what she calls a “common sense fix” to the GOP’s megabill. Titus also warned that the changes could drive people toward the underground gambling market because of the new disadvantages it creates for players.

What is on the One Big Beautiful Bill?

The OBBBA is packed with hundreds of provisions. One of the biggest changes is that it permanently extends the individual tax rates Trump signed into law back in 2017, which were originally set to expire at the end of 2025.

It also raises the cap on the state and local tax deduction to $40,000 for taxpayers earning less than $500,000. But that higher cap only lasts five years before dropping back down to $10,000. On top of that, the bill introduces several temporary tax breaks for tips, overtime pay, and auto loans. It even creates “Trump Accounts” that let parents set up tax-deferred savings for their kids, though these are set to expire in 2028.

The bill also takes aim at clean energy policies. It begins phasing out some tax credits from the Biden-era Inflation Reduction Act while favoring fossil fuels over renewables.

To pay for all this, the debt ceiling is raised by $5 trillion, and Medicaid faces a significant 12% funding cut. Meanwhile, funding for Immigration and Customs Enforcement (ICE) skyrockets from $10 billion to more than $100 billion by 2029, making it the most heavily funded law enforcement agency in the country.

The bill narrowly passed the House of Representatives on Thursday, July 3, with a 218–214 vote. Every Democrat and two Republicans voted against it.

Critics, including several think tanks and policy experts, have slammed the legislation for its regressive tax structure. They argue that many of its policies are gimmicky and warn it could lead to the largest upward transfer of wealth from lower-income Americans to the wealthy in US history.

How will the Big Beautiful Bill affect gambling?

One of the more controversial parts of the bill is the 90% deduction cap on gambling losses. Under this rule, a gambler who wins $100,000 but then loses the same amount would still have to pay taxes on $10,000. Even though they broke even in reality, the IRS would treat it as if they had “phantom income.” This means that even gamblers who break even or take a small loss could end up owing thousands in taxes.

Republicans hurt Las Vegas gamblers and the gaming industry with their BS budget.

I am working on a bill now that would reverse this unfair anti-gaming tax provision. pic.twitter.com/kDoNuDC726

— Dina Titus (@repdinatitus) July 3, 2025

Consequently, Titus responded: “On Monday (July 8), I’m introducing the FAIR BET Act, the Fair Accounting for Income Realized from Betting Earnings Taxation Act, to permanently restore the 100% loss deduction from gambling winnings.”

The 75-year-old Democrat also stressed the greater danger for the gaming industry: “It pushes people into the black market if they don’t do regulated gaming, because they have a tax disadvantage, and the black market doesn’t pay taxes, isn’t regulated, doesn’t help with problem gaming.

“So it’s bad for the industry as well as for the player.”

Representative Troy Nehls, a Republican from Texas, is cosponsoring the bill even though he supports the broader act.

“While I proudly voted for the One Big Beautiful Bill Act, which prevents the largest tax hike in American history, the Senate’s version contained a provision that I strongly disagree with,” Nehls told Newsweek.

“Prior to the passage of the OBBBA, the tax code contained a 100% deduction for gambling losses and expenses up to the amount of the individual’s winnings. This deduction was not changed in the House-passed version of the bill. The Senate, unfortunately, included a provision in their version of the legislation that reduced the allowable deduction to 90%, creating an overly punitive tax on gambling. This provision is unfair, which is exactly why I am a cosponsor of Rep. Dina Titus’ FAIR BET Act.”

The FAIR BET Act is gaining more bipartisan support!

Thank you @RepHorsford, @Congressman_JVD, and @MarkAmodeiNV2 for co-sponsoring.

Now it’s time to eliminate this unfair tax on phantom income.

— Dina Titus (@repdinatitus) July 8, 2025

Nehls’ support for the FAIR BET Act shows how some Republicans backed the larger bill even though they didn’t agree with every part of it. This isn’t unusual. Lawmakers often vote for massive reconciliation packages even when they see flaws because they support other key parts of the legislation.

Critics, however, warn that the gambling-related measure in Trump’s bill could hurt the industry. They argue it would force players to report taxable income even when they have net losses and could end up discouraging tax compliance altogether.

When will the bill go into effect?

If the FAIR BET Act doesn’t pass, the new tax deduction rule in Trump’s bill will take effect in 2026.

The current tax laws around gambling are relatively straightforward. Any bet that results in a win counts as income, and you have to pay taxes on it. For example, if you sit at a blackjack table and win $100, that $100 is treated just like wages from a job, you owe taxes on it.

How will the Big Beautiful Bill affect gamblers?Under Trump’s Big Beautiful Bill, professional sports bettor Mike finds himself in a tough spot. In 2025, Mike wagered heavily throughout the year, winning $500,000 but also losing $480,000, leaving him with a modest net profit of $20,000. Under current IRS rules, as explained in Topic 419, Mike could deduct 100% of his gambling losses against his winnings, meaning he paid tax only on his actual $20,000 profit. But starting in 2026, the new bill limits loss deductions to 90% of total gambling losses. This means only $432,000 of Mike’s $480,000 in losses can offset his winnings, leaving him with a taxable income of $68,000 instead of $20,000. As a result, even though Mike’s real profit was only $20,000, he now owes taxes on an extra $48,000 of “phantom income” created by the deduction cap. Worse, if Mike had actually lost money overall—say he won $500,000 but lost $520,000—he would still owe taxes on $32,000 of taxable income despite being down $20,000 for the year. This change disproportionately impacts professional gamblers and high-volume bettors who operate on slim margins, while casual gamblers with smaller stakes are unlikely to feel its effects.

The change in Trump’s bill would cap those deductions at 90% of losses, meaning even people who break even or lose slightly would still owe taxes on their “phantom income.”

‘Phantom income’ and professional gamblers at risk

The change has sparked concern from tax experts and industry insiders who warn it could have devastating effects on professional and serious recreational gamblers, potentially pushing more betting activity into the unregulated underground market.

Chad D. Cummings, a corporate and tax attorney and CPA at Cummings & Cummings Law, described the new cap as “a substantial departure from longstanding federal tax policy” with “far-reaching implications for both casual and professional gamblers.”

“The rule may discourage participation in legal gaming markets, affect state-level gaming revenues, and create tension between state economic policies and federal tax enforcement.” – Chad D. Cummings, Cummings & Cummings tax attorney and CPA

“Under the new rule, taxpayers may only deduct gambling losses up to 90% of their gambling winnings, rather than the full amount as permitted under prior law,” Cummings told ReadWrite. “This means that even in cases where a gambler has no net profit—or indeed a net loss—they will still be taxed on 10% of their gross gambling winnings. The result is the creation of what practitioners term ‘phantom income’: taxable income that does not reflect any actual economic gain.”

Cummings added that the measure is “especially punitive for professional gamblers, who operate under § 162 of the Internal Revenue Code and rely on full deductibility of losses as a fundamental component of their business model.” He explained that by limiting loss deductions to 90%, “the law effectively taxes a portion of their working capital—an approach inconsistent with how other business losses are treated.”

Casual gamblers won’t escape unscathed

For casual players, the impact may be less noticeable at first, but serious recreational gamblers who itemize their deductions could also be affected. Leslie K. Harris, Marketing Director at Colorado’s Double Eagle Hotel & Casino, said, “For most recreational gamblers, the changes will be insignificant, as they typically do not take advantage of itemized tax deductions.

This new amendment to the One Big Beautiful Bill Act would end professional gambling in the US and hurt casual gamblers, too.

You could pay more in tax than you won.

Contact your representative quickly. pic.twitter.com/U5yToBZDcQ

— Phil Galfond (@PhilGalfond) July 1, 2025

“However, those who gamble heavily and deduct their losses… will face what is known as ‘phantom income,’ whereby if a person wins and loses $100,000 in a year, they will only be able to write off $90,000 of the loss and will pay taxes as if they had $10,000 in net income.”

Harris warned this shift “effectively turns the gambling tax into a tax on the total amount wagered, rather than on actual profits” and may drive some players “to seek out unregulated betting venues.”

Complexities in gambling tax reporting with Big Beautiful Bill

Beyond the financial hit, the change adds new headaches at tax time. “From a compliance standpoint, the new rule adds layers of complexity to tax filings,” Cummings said. “Taxpayers must now calculate not only their gross winnings and losses but also determine the portion of losses that will be disallowed under the 90% limitation.”

“One of the most alarming consequences of the new limitation on the deduction of losses is, of course, the growth of the illegal gambling market. When tax conditions become too harsh on legal platforms, players begin to look for alternatives where they can place bets without unnecessary tax liabilities.” – Leslie K. Harris, Double Eagle Hotel & Casino Marketing Director

Harris echoed these concerns: “Now even those who do not actually make a profit may face a tax liability due to the large volume of bets. This complicates things because taxes are paid on total bets placed, not actual winnings… This, of course, changes the approach of players and creates additional pressure on those who conscientiously declare their income and expenses.”

Critics argue the deduction cap threatens individual players as well as the gambling industry and state tax revenues. Harris warned, “One of the most alarming consequences… is, of course, the growth of the illegal gambling market. When tax conditions become too harsh on legal platforms, players begin to look for alternatives where they can place bets without unnecessary tax liabilities.”

While Cummings believes the change reflects “a shift in federal tax treatment of speculative activity” and a break from “the historic principle that income tax should apply only to net income.” He cautioned, “This undermines the neutrality of the tax code and imposes artificial income on taxpayers who, under basic economic principles, did not win.”

Without a fix, gamblers and industry leaders say the new deduction cap could be a game-changer – literally.

Featured image: Grok

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