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A key congressional effort to reverse a controversial change in federal gambling tax policy stalled late last year. The US House Rules Committee declined to advance the Fair Accounting for Income Realized From Betting Earnings Taxation Act, known as the FAIR BET Act, as an amendment to the 2026 National Defense Authorization Act. This decision leaves in place a reduction in the gambling loss deduction scheduled to take effect in the 2026 tax year.
The bill was introduced by Rep. Dina Titus, D-Nev., whose district includes Las Vegas and other major gaming hubs. The FAIR BET Act sought to restore the longstanding federal practice allowing bettors to deduct 100% of documented gambling losses from winnings on federal tax returns.
How the FAIR BET Act could restore full gambling loss deductions
For decades, US taxpayers who itemized deductions could offset gambling losses up to the amount of their winnings, meaning only net gains were taxed. The rule applied to all forms of legal wagering, including sports betting, poker, retail and real-money online casino games, and pari-mutuel betting.
A provision in the One Big Beautiful Bill reduced the allowable deduction to 90% of losses. As a result, bettors could break even overall but still owe federal taxes because part of their losses would no longer be deductible.
Tax analysts estimate the change could generate roughly $1.1 billion in revenue over eight years, but opponents argue it unfairly burdens gamblers.
Rep. Titus calls for tax fairness for gamblers
Titus framed the FAIR BET Act as a matter of basic tax equity. In a statement released when she introduced the bill in July 2025, she called the deduction change “a tax increase on Americans who gamble” and stressed the need to prevent people from being taxed on income they did not earn.
In remarks entered into the Congressional Record, Titus said the act would prevent bettors from paying taxes on income they never earned and discourage players from turning to offshore and unregulated betting markets. After the Rules Committee rejected her NDAA amendment, she reiterated her commitment on X:
Why the FAIR BET Act stalled in Congress
Titus’ strategy to attach the FAIR BET Act to the defense bill reflected a common legislative tactic: linking popular or bipartisan proposals to must-pass legislation. However, the Republican-controlled Rules Committee declined to consider the amendment, effectively blocking it from a floor vote.
House leadership cited concerns about the fiscal impact of restoring the full deduction, noting it could reduce projected federal revenue. Lawmakers also suggested broader tax policy discussions might be a more appropriate venue for addressing the issue.
Gambling industry leaders and lawmakers respond
The debate has drawn attention from across the gambling industry and Capitol Hill. Industry groups argue that restoring the full deduction promotes fairness for both recreational and professional bettors and supports the regulated gaming market.
The National Thoroughbred Racing Association praised Titus’ leadership, noting the deduction is vital to the economic health of horseplayers and the broader racing ecosystem. NTRA leaders called the reduction harmful and pledged continued advocacy for the FAIR BET Act.
Bipartisan interest has also emerged. Some Republican lawmakers have expressed concern about the deduction change and support exploring legislative fixes. At a House Ways and Means Committee field hearing, Chairman Jason Smith, R-Mo., said lawmakers on both sides are considering solutions before the cap takes effect.
What gamblers should know about 2026 tax changes
As written, the revised gambling winnings tax will apply beginning with the 2026 tax year unless Congress acts beforehand. Bettors who break even or incur net losses could face taxable income that does not reflect their actual financial position, complicating tax planning and increasing compliance burdens.
Tax professionals recommend that gamblers consult advisers, especially those who wager frequently or treat gaming as a primary source of income. Preparers may need to adjust strategies to account for the new rules.
Looking ahead: FAIR BET Act prospects
With the Rules Committee’s decision, the FAIR BET Act’s future now rests with the House Ways and Means Committee and potential inclusion in future tax or budget negotiations. As the 2026 tax year progresses, industry advocates and lawmakers are expected to intensify efforts to address the deduction cap.
Whether Congress will reach consensus on gambling tax reform remains uncertain. For players and stakeholders invested in the regulated market’s growth, the outcome of this policy debate will be closely watched in the months ahead.
