How Did the Feared 'Phantom Tax' Come About?
The roots of this issue trace back to July 2025, when a comprehensive tax package known as the One Big Beautiful Bill Act (OBBBA) was signed. An adjustment to the tax code was inserted at the last moment, which, effective January 1, 2026, reduced the ability to deduct provable gambling losses from 100% to 90% of winnings.
For decades prior, a simple rule applied: players could deduct losses up to the amount of their total winnings. However, the new cap introduced the so-called 'phantom tax,' meaning taxation of income that the player never actually earned.
To explain with a simple example: If a tournament player won $100,000 in a year but also spent $100,000 on buy-ins (ending at net zero), under the rules as of 2026, they could only deduct 90% of losses, which in this case would be $90,000. The remaining $10,000 became taxable income, although the player did not actually make a profit.
The new rule caused a massive outcry in the poker world. Legendary player and Poker Hall of Fame member Erik Seidel even announced a cutback on his playing schedule and a partial retirement in response to the tax changes.
Congresswoman Dina Titus from Nevada repeatedly warned that this tax burden would drive players to unregulated and illegal foreign platforms.
A Bipartisan Breakthrough in Congress
Efforts to repeal the 90% cap lasted over 14 months, leading to the introduction of three separate bills: the FAIR BET Act (Representative Dina Titus), the WAGER Act (Representative Andy Barr), and the FULL HOUSE Act (Representatives Max Miller and Steven Horsford).
A key shift occurred in mid-September 2026, when provisions for fully restoring loss deductions were incorporated into a broader package, the Digital Asset Tax Certainty Act (H.R. 10357).
House Ways and Means Committee Chairman Jason Smith and Nevada Representative Steven Horsford emphasized that this is a core principle of tax fairness. The state should not tax money that people have not actually earned.
The provision was approved in committee with a rare bipartisan majority.
Breaking: the big tax bill with a provision to repeal the 90% cap on gambling losses was just overwhelmingly voted through, with bipartisan support, to the House Rules Committee. It’s a technical step before it goes to the House floor for a full vote. https://t.co/bdANrNXjoH pic.twitter.com/0O1XlArxC6
— Fairplaygov (@fairplaygov) September 16, 2026
What Are the Next Steps and What Should Players Do?
Approval in committee marks a significant step, but the legislative process is not yet complete. Bill H.R. 10357 now heads to the House Rules Committee and then to the floor of the House of Representatives, expected after the November midterm elections. It must then pass the Senate and receive the president's signature.
Prediction markets currently estimate the likelihood of fully restoring the 100% deduction of losses by April 1, 2027, at approximately 50%.
Tax experts offer the following advice for poker players:
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Keep meticulous records of all wins and expenses: Save receipts, buy-in slips, and tournament statements for the entire year 2026.
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Prepare for an amended tax return: If the law passes retroactively to January 1, 2026, players with accurate records will be able to file an amended tax return and potentially receive refunds. Accurate documentation is crucial.
Sources: X, CBS News
