If you are a professional gambler, you should file a Schedule C (Profit or Loss from Business) to report your gambling winnings, losses, and related business expenses. Here's why and how:
Professional Gambler Filing on Schedule C
As a professional gambler, gambling is your trade or business. The IRS considers you self-employed if gambling is your primary source of income and you pursue it with regularity and the intent to earn a profit.
Filing on Schedule C allows you to:
- Report Winnings: Include all gambling winnings as gross income on Schedule C.
- Deduct Business Expenses: You may deduct ordinary and necessary business expenses (e.g., travel, meals, lodging, supplies), but only up to the amount allowed under current law.
- Deduct Gambling Losses: Subject to the limitations of IRC §165(d) and the OBBBA, you may deduct up to 90% of your gambling winnings, provided you have sufficient verified losses and expenses.
- This 90% cap applies to tax years beginning in 2026. For 2025 and prior years, professional gamblers may deduct all losses and expenses up to the amount of winnings.
- Self-Employment Tax: You will pay self-employment tax on your net earnings from gambling.
⚠️ NOTE: The combined total of your gambling losses and business expenses is limited to 90% of your gambling winnings. You cannot deduct more than this amount, even if your actual losses and expenses exceed it.
Schedule C Reporting
To report your gambling income on a Schedule C within the program:
- Log in to your account
- Use the left-side menu to navigate to Federal > Income
- Scroll down to Profit or Loss from Business (Schedule C) and select Begin or Add/Edit
- Choose Guide Me or Let Me Enter Myself, depending on your comfort level
- Report expenses under the General Expenses menu item
- Report gambling losses under Other Expenses
⚠️ The program will not automatically enforce the gambling loss deduction limits. You must manually ensure your net Schedule C does not result in a loss.
Comparison: Gambling Loss Deduction Limits (OBBBA + TCJA)
Example Scenario
- Gambling Winnings: $400,000
- Verified Gambling Losses $390,000
- Business Expenses: $50,000
1. Under TCJA Rules (2025 and Prior)
- Deduction Limit: You may deduct up to the full amount of your winnings, as long as you have verified losses and expenses.
- Calculation:
- Losses $390,000
- Expenses: $50,000
- Winnings: $400,000
- Dedication Allowed: $400,000 (limited to winnings)
- Taxable Income: $400,000 - $400,000 = $0
Result: No taxable income. You broke even or lost money, so you owe no tax on gambling income.
2. New OBBBA Rule: 90% Cap on Deductions (Effective 2026)
Beginning in tax year 2026, the One Big Beautiful Bipartisan Act (OBBBA) limits gambling loss deductions to:
The lesser of 90% of your gambling winnings, or your verified gambling losses and related business expenses
- Winnings: $400,000
- Losses: $390,000
- Expenses: $50,000
- Deduction Allowed: 90% of $400,000 = $360,000
- Taxable Income: $400,000 - $360,000 = $40,000
Result: $40,000 taxable income. Even with $440,000 in losses and expenses, you can only deduct $360,000—90% of your winnings.
Net Gambling Losses vs. Business Expenses
- Net Gambling Losses: The amount by which your losses exceed your winnings. These are not deductible beyond the amount of the winnings (90% cap starting in 2026) and cannot be carried forward.
- Business Expenses: Non-wagering costs necessary to operate your gambling activity (e.g., travel, lodging, training). Under the TCJA (2018–2025), these expenses are only deductible up to the amount of your gambling winnings and are combined with losses to arrive at cap (90% cap starting in 2026).
Reporting W-2G Winnings or Non-Professional Gambling
- W-2G Forms: Issued by gambling establishments for certain winnings (e.g., slots > $1,200, poker > $5,000).
- Non-Professional Gamblers:
- Report W-2G winnings on Form 1040, Schedule 1 as “Other Income.”
- Deduct losses only if itemizing on Schedule A, and only up to the amount of winnings (2025) or limited to 90% of the winnings (2026).
Important things to consider
Record-Keeping: As a professional gambler, maintain detailed records of all gambling activities, including dates, locations, amounts wagered, winnings, and losses. Keep receipts, tickets, and any relevant documentation.