Crypto Tax Bill May Reinstate Full Gambling Loss Deductions
Bipartisan proposal seeks to reverse 90% deduction cap on gambling losses
1Current deduction limitation
The 2022 One Big Beautiful Bill reduced gambling loss deductions from 100% to 90% of winnings. This creates taxable 'phantom income' when losses equal winnings - a gambler breaking even on $100,000 would owe taxes on $10,000. The Las Vegas Sun highlighted this as creating unfair tax liability on money never actually retained by taxpayers. The change disrupted decades of precedent allowing full offset of gambling losses against winnings.
2Proposed legislative fix
The House Ways and Means Committee advanced the Digital Asset Tax Certainty Act 38-5, including language to restore 100% deduction for gambling losses. This bipartisan crypto tax bill unexpectedly became the vehicle for the gambling provision. The measure would apply to tax years starting after December 31, 2025, preventing a scheduled further reduction to 80% in 2027. However, it remains pending full Congressional approval rather than enacted law.
3Legislative pathway challenges
While committee approval marks progress, Punchbowl News reports limited legislative calendar time and competing tax priorities create uncertainty. Previous attempts failed, including Rep. Dina Titus' standalone FAIR BET Act 14 months earlier. The current provision survived by being folded into broader crypto legislation rather than advancing alone. The House Rules Committee previously blocked similar amendments to defense bills, showing the difficulty of standalone gambling tax measures.
4Industry response
Gaming lobbyists remain cautious despite committee approval, recognizing the distance between committee action and final enactment. The provision's inclusion in a crypto bill rather than dedicated gambling legislation reflects strategic legislative packaging. Previous efforts stalled after committee-level support, creating skepticism about timing. The Las Vegas Sun reported gaming interests want resolution but understand Congressional procedural hurdles that could delay or prevent final passage.
5Tax policy implications
The debate centers on whether breaking-even gamblers should face tax liability. Proponents argue the 90% cap creates unfair taxation of non-existent income, while opponents may view gambling losses differently than business expenses. The proposed change would return to treating gambling like other activities where losses fully offset gains. However, the fundamental limit preventing deductions exceeding winnings would remain intact under the committee's proposal.
6Legislative packaging strategy
The successful committee vote resulted from attaching the gambling provision to popular crypto tax legislation rather than pushing standalone bills. Language from Rep. Max Miller and Rep. Steven Horsford's FULL HOUSE Act was incorporated after their earlier FAIR BET Act failed. This demonstrates how niche tax provisions often require legislative vehicles with broader appeal to advance, especially in crowded Congressional calendars with competing priorities.
7Potential taxpayer impact
For professional gamblers and casual players alike, the difference between 90% and 100% deduction creates real tax liability. A player with $50,000 in winnings and $50,000 in losses currently owes taxes on $5,000 of phantom income. The change would particularly benefit frequent gamblers and those in states with legal sports betting. However, the provision maintains the existing rule that deductions cannot exceed winnings, preventing net loss claims against other income.
8Next steps in Congress
The bill now moves to the full House, where passage isn't guaranteed before year-end. Even if passed, Senate consideration would be required. Punchbowl News notes limited legislative days remain in 2023, increasing likelihood of action spilling into 2024. The measure represents the first serious movement since the 2022 reduction, but gaming interests recognize it may take sustained effort to complete the legislative process given Congressional gridlock on tax issues.
Original article: ReadWrite — Crypto Tax Bill May Reinstate Full Gambling Loss Deductions