Gambling Tax Law

Everything YOU need to know about IRC 165(d)

For gamblers and the professionals who prepare their returns

Every jackpot is reported to the IRS. Your losses are not.

Most tax returns that report gambling income are prepared wrong, and beginning with 2026 tax years only 90 percent of gambling losses are deductible. Gambling Tax Law gives gamblers and tax professionals the court cases, IRS rulings and gambling-session method to report winnings and losses correctly and defend them.

I prepare tax returns
I gamble

Not sure where to start? Get the free Six-Step Gambling Session Checklist.

One day at the casino

Cash at the start$10,000

Cash at the end$15,000

Jackpots reported on W-2Gs$100,000

Totaling the W-2Gs: income$100,000

Gambling session: gain$5,000

The winnings were recycled through the machines all day. Reported by session, the day is a $5,000 gain, not $100,000 of income. Example from “Taxation of Recreational Gamblers,” EA Journal.

What a wrong gambling return costs

Tax on money you never kept

For 2026 and later years, a gambler who itemizes, wins $100,000 and loses $100,000 can deduct only $90,000 of the losses, and pays tax on $10,000 he never had.

An inflated adjusted gross income

Totaling the W-2Gs instead of the gambling sessions can report $100,000 of winnings for a day that ended $5,000 ahead, and a higher AGI shrinks other deductions.

Lost deductions and penalties

Without records, courts disallow losses. One gambler who did not report a $73,733 jackpot owed a $20,384 deficiency plus $7,417.70 in penalties. Read the case.

The IRS gives you seventeen words. We give you the cases.

Section 165(d) says little more than that losses are allowed only to the extent of gains. The IRS instructions add a line on Schedule A. Tax software totals the W-2Gs and stops there. The real rules are in the court cases and IRS rulings, and they are hard to find in one place.

Gambling Tax Law is written by Reece B. Morrel, Jr., an attorney and CPA in Tulsa, Oklahoma, who has been involved in multimillion-dollar audits involving gambling issues and has written on the taxation of gamblers for tax professionals.

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In the library

345 gambling tax opinions in full text, from the Supreme Court to Tax Court summary opinions, each with a standardized citation and links to every case that cites it.

Start where you are

Tax professionals

Prepare gambling returns you can defend

  • Full-text opinions with standardized citations and cross-references
  • The gambling-session method, from CCA 2008-011 to the Tax Court
  • For subscribers: case briefs, tables of authorities and updates on the 90 percent rule
For tax professionals

Gamblers

Know what to report before the IRS asks

  • All winnings are taxable, whether or not you received a W-2G
  • Losses count only if you itemize, only up to your winnings, and now only 90 percent of them
  • Your records decide the case, so keep a gambling diary
For gamblers

Three steps to a correct return

  1. Get the checklist. Six steps for reporting wagering gains and losses, free.
  2. Group the year into gambling sessions. Time, place and activity, backed by a diary and the W-2Gs.
  3. Report and explain. Winning sessions as income, losing sessions on Schedule A, with the authority to back them up.

Free download

The Six-Step Gambling Session Checklist

The six steps from “Taxation of Recreational Gamblers” in the EA Journal, updated for the 90 percent rule. One page to keep, or to hand to your preparer.

Get the checklist

The library

Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.

Internal Revenue Code § 165(d), as enacted August 16, 1954. Read the section and its history

Court cases by decade

1910s

1920s

1930s

1940s

1950s

1960s

1970s

1980s

1990s

2000s

2010s

2020s

Table of Cases by year, with full citations. Table of Cases by name.

Articles and commentary

Returns that match every W-2G, report the true AGI, and stand up on audit.

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