New tax laws could put strain on gamblers, making them pay taxes on money they didn’t earn

Some key provisions in President Donald Trump’s so-called One, Big, Beautiful Bill Act will impact gamblers and potentially the state’s growing gaming industry.

Starting Jan. 1, players were capped at deducting 90% of their gambling losses up to the amount of their winnings. This means the remaining 10% is taxed even if total losses exceed or equal winnings — a sharp departure from previous years and a change that's gained bipartisan pushback.

Under the previous law, a gambler who won $100,000 and lost $100,000 in a calendar year didn't have to report taxable income, as the losses offset their earnings. Under Trump’s tax plan, that same player would only be able to deduct up to 90% of their winnings, so they would have to pay federal income taxes on $10,000.

"The result creates an unfair precedent by taxing phantom income and uniquely penalizing a legal, heavily regulated activity," the American Gaming Association said in a July letter to the U.S. House Committee on Ways and Means.

Bills have been introduced to the U.S. House and Senate to repeal the 90% limitation, but neither bill has been passed, though there is strong bipartisan support.

Filers also should be aware of another key revision in the act regarding gambling-related deductions, according to Chris Altruda, a Logan Square-based senior gaming analyst for Ingame.com, which covers the regulated U.S. sports betting industry.

“That 90% deduction now includes non-loss expenses, including subscriptions to data services, which were previously taxed separately,” Altruda said.

Another change under the sweeping tax and spending bill is an update to slot jackpot tax reporting. As of Jan. 1, 2026, the minimum reporting threshold is $2,000.

The Illinois Department of Revenue said it allows the federal threshold for withholding. "The department is in the process of currently revising Pub 130 to reflect these changes, and once the document is finalized, it will be available on our website," Maura Kownacki, spokesperson for the Illinios Department of Revenue, said in an emailed statement.

Previously, casinos had to issue a Form W-G to slot players who won $1,200 or more — a threshold that was in place since 1977. Gaming industry advocates have been pushing for years to have the threshold increased, saying it would reduce paperwork while also keeping up with inflation.

Keep detailed records

The U.S. government began taxing gambling income in 1951, in an effort to curtail organized crime and other illegal operations.

Federal income tax law classifies gambling winnings as ordinary, taxable income, and Illinois primarily follows federal tax laws. That means Illinois gambling winnings — from sports betting, lottery and casinos — also are bound to the state’s 4.95% flat income tax rate.

In one significant contrast to federal law, the state prohibits deductions for any gambling losses.

One thing that hasn't changed under the new legislation is that the gambling deduction will remain an itemized deduction and should be reported on Schedule A. If a filer claims the standard deduction, they're still obligated to report and pay tax on all winnings earned during the year, and they won't be able to deduct any losses.

Illinois taxpayers must report:

• Casino winnings
• Sports betting, in-person and online
• Daily fantasy sports transactions
• Poker, slots, horse racing wagers
• Lotteries, raffles, bingo, charity gaming, and similar games of chance

Efforts to expand third-party reporting is expected to capture more online and app-based gambling activity, as casinos and digital platforms become more integrated with IRS data systems, making underreporting more difficult, according to Mark Gallegos, partner at accounting firm Porte Brown in Elgin.

“The overall framework for taxing gambling hasn’t changed much, but beginning in 2026, the loss limitation becomes stricter, and the likelihood that the IRS receives independent information about gambling activity continues to increase,” he said.

Impacts on the gaming industry

DraftKings CEO Jason Robins said in a CNBC interview last August that the tax provision “doesn’t make sense," questioning how someone could “pay income tax on something that’s not actually income.”

The policy changes could primarily affect professional players and big-stakes gamblers, who will see more of their winnings taxed, experts said.

That short list includes Gov. JB Pritzker, a noted poker player who has approved sports betting, the build-out of six new casinos and the expansion of slot machines across the state during his tenure.

In October, Pritzker’s campaign released 2024 tax documents showing he won more than $1.4 million gambling that year. The windfall happened in Las Vegas at the blackjack tables, with the winnings donated to charity.

Pritzker’s office didn't respond to a request for comment.

While a small percentage of Illinois taxpayers do itemize gambling losses, the ramifications on the state’s gaming industry could be severe, warned Ryan Butler, a Florida-based senior news analyst at Covers.com, which provides sports betting information.

“Casinos and sportsbooks see an outsized proportion of their revenue from a small subset of heavy bettors,” he said. “If these 'whale' players reduce their gambling spend or leave the regulated U.S. market entirely, some projections estimate it could cost the industry billions in annual revenue losses.”

Illinois gamblers and gaming companies are already subject to some of the highest taxes in the country.

In May 2024, the General Assembly approved a progressive levy on online sports betting companies, like FanDuel and DraftKings, that tops out at 40% of their local net revenue.

A year later, Illinois became the first state to tax individual wagers when the General Assembly approved a levy on licensed sportsbooks of 25 cents for each of the first 20 million wagers accepted per year, then 50 cents for every bet beyond that.

FanDuel and DraftKings countered by implementing customer surcharges in September 2025 on individual wagers.

Meanwhile, a group of multibillion-dollar sports gambling companies and their lobbying firm in December filed a lawsuit against the city of Chicago aiming to block its 10.25% tax on any revenue collected from bets placed within city limits.