New Gambling Tax Rules for 2026: What Sonoma County Gamblers Need to Know

Hi Friends,

With Graton Resort & Casino and River Rock Casino right in our backyard, many Sonoma County residents enjoy gambling as a form of entertainment. Whether you’re heading out for a night of cards, catching a game, or meeting friends for dinner at one of the great restaurants these casinos offer, it’s worth knowing how gambling activity is treated for tax purposes.

As we head into a new year, there are some important changes to the federal tax rules for gambling that you should be aware of, especially if you regularly place bets, play casino games, or participate in poker tournaments.

The biggest change affects how gambling losses can be deducted starting in 2026, and it may result in more taxable income than many people expect.

Gambling winnings are still fully taxable

Gambling Table with chips and cards

All gambling winnings are considered taxable income and must be reported on your federal tax return. This applies regardless of the amount and regardless of whether you receive a Form W-2G.

Winnings from casinos, sports betting, lotteries, poker, raffles, and other wagering activities are all included in gross income. Keeping track of your winnings throughout the year is essential, even for smaller or casual bets.

New Gambling Tax Rules: losses limited to 90%

Through the 2025 tax year, the long-standing rule still applies: gambling losses are deductible only if you itemize deductions, and only up to the amount of your winnings.

Starting with tax years beginning January 1, 2026, that rule changes.

Under the new gambling tax rules, losses are limited to 90 percent of your documented losses and still capped at your winnings.

Example: If you have 10,000 dollars of gambling winnings and 10,000 dollars of gambling losses, you may deduct only 9,000 dollars of losses. That leaves 1,000 dollars of taxable income, even though you broke even in cash terms.

This is often referred to as phantom income because you can owe tax even when you did not actually make money.

Flowers in Sebastopol Phot by Melissa

How this applies to recreational versus professional gamblers

For most people, gambling is considered recreational.

Recreational gamblers:

- Report winnings as income on Form 1040

- May deduct losses only if they itemize deductions

- Will be subject to the new 90 percent loss limitation starting in 2026

Professional gamblers report activity on Schedule C. However, the same 90 percent limitation still applies to total losses and related expenses.

Why the rules changed

This change comes from new federal legislation passed in 2025 that made gambling loss rules permanent and added the 90 percent limitation as a revenue-raising provision.

Record keeping matters more than ever

With the new limitation, good records are critical.

You should maintain detailed documentation of:

- Gambling wins and losses

- Tickets, receipts, and wagering statements

- Casino player account summaries

- Dates, locations, and types of wagers

Clear digital records are generally acceptable as long as they are complete and accessible.

What this means for Sonoma County gamblers

If you enjoy spending time at Graton, River Rock, or other local casinos, whether for gaming, dining, or entertainment, these new gambling tax rules may not change how you play, but they can change how your gambling activity affects your taxes.

For 2025 returns filed in 2026, the old rules still apply. Beginning with 2026 tax year returns filed in 2027, the 90 percent limitation will generally apply.

If gambling is part of your routine, it’s a good idea to talk with your tax professional about record keeping, withholding, or estimated tax payments before year-end. If you’d like help reviewing how this may affect your situation, our tax planning services can help you think through it in advance.

Warmly,

Melissa Ochoa

Enrolled Agent & Owner, Apple Blossom Tax Service

Serving Sebastopol and Sonoma County