The controversial cap on the amount of losses a gambler can deduct from winnings is driving bettors offshore to seek workarounds to avoid extra fees. A bill to restore the ability to deduct 100% of losses from winnings before paying tax is now making progress and could pass by next year.
The House Ways and Means Committee approved the Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE) Act on Wednesday.
Since the start of the year, loss deductions have been capped at 90%, a change that passed as part of Donald Trump’s One Big Beautiful Bill last year. The bill seeks to reverse that change and allow gamblers to deduct all their losses from their winnings.
Gamblers Using Alternative Platforms Since Tax Change
Pro gamblers widely opposed the tax change, with many saying it makes it almost impossible to carve out a profit from sports betting.
When the tax was introduced in January, Ted Sevransky, a Vegas pro-bettor known as “Teddy Covers“, said gamblers would find a workaround to avoid extra fees.
“When you’re talking about successful professional gamblers, there aren’t that many of them, and they tend to be pretty sharp guys,” he told the Las Vegas Sun. “So, when you think about figuring out workarounds, you’d expect them to find ways not to have to pay the extra tax.”
Dr. Mikhail Sher is a professor in the Leon Hess Business School at Monmouth University. In his free time, he also bets on sports, deploying several strategies to ‘beat the bookies’.
He told Gaming America that the tax change “has already pushed a bunch of sports bettors to bookies and offshore betting sites instead of state-regulated sportbooks, reducing the revenue for the states and creating potential for bettors to be taken advantage of by unregulated sportsbooks. Clearly an undesirable outcome, anyway you look at it.”
Sher is working on a book titled “Beat the Sportsbook: The Theory and Practice of Successful Sports Betting,” which is due to be released next year. One of the most important points is identifying value bets where the bettor can squeeze out a slim edge over the house.
With the tax change, that becomes more challenging, as Sher points out, “a sports bettor with $98,000 in winning sessions and $100,000 in losing sessions would be taxed on $8,000 in fantom winnings ($98,000-.9*$100,000)”.
Most Gamblers Remain Unaffected
His colleague and co-author, Dr. Robert Scott, was less certain about the tax’s impact.
“Professional gamblers generally won’t notice a significant difference”, he said. “I think if the change affects their behavior, then they’re probably in the wrong business.”
“It makes me think of the Warren Buffett quote, ‘I have worked with investors for 60 years, and I have yet to see anyone – not even when capital gains rates were 39.9 percent in 1976-77 – shy away from a sensible investment because of the tax rate on the potential gain.’ I think the same holds true here,” Scott adds.
Admittedly, he says he bets less frequently than Sher. Nevertheless, he also favors repealing the tax change.
“Personally, 100% made sense for a variety of reasons—losses equal gains, simple. 90% seems a cheap shot to me since 10% won’t be a grain of sand filling the government’s $40 trillion debt hole,” he said.
For most bettors, the tax change is irrelevant, as they already lose far more than they win
Nevada Lawmakers Push On Behalf Of Gamblers
The bill’s sponsor, Congressman Steven Horsford, said he introduced the legislation to protect Nevadans and their jobs.
“From dealers and housekeepers to restaurant workers and small business owners, families across our state depend on visitors choosing Nevada,” Rep. Horsford said in a press release. “This unfair tax puts their livelihoods at risk. That’s why I fought to advance my FULL HOUSE Act, and I won’t stop until we get this relief signed into law.”
Rep. Dina Titus, also of Nevada, introduced a similar bill in response to the tax change. She celebrated the FULL HOUSE Act’s progress on Wednesday and said she will keep fighting until the loss deduction is restored.
Finally, after 14 months of uncertainty, my fix to restore the 100% tax deduction for gambling losses has been passed out of committee.
