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State of Play’s TL;DR
- A federal tax change affecting gamblers is drawing renewed pressure from the horse racing industry.
- The National Thoroughbred Racing Association has asked the US Treasury Department and the IRS to support legislation that would restore the full deduction for gambling losses, after a new 90% cap took effect this year.
In a July 17 letter to Treasury Secretary Scott Bessent, the National Thoroughbred Racing Association (NTRA) urged federal officials to back legislation returning the gambling loss deduction to its previous 100% level. NTRA President and CEO Tom Rooney signed the letter.
The group argues the current rule can leave some gamblers paying taxes even when they did not finish ahead overall, known as “phantom taxes.” Under the example cited in the source article, a bettor with $10,000 in winnings and $10,000 in losses previously could offset all winnings. Under the current 90% rule, that same bettor would still have to report $1,000 in gambling winnings.
The NTRA called the change harmful.
“This law, which had previously remained unchanged for 70 years, could result in individuals paying taxes on net income they didn’t realize.”
The change was included in the One Big Beautiful Bill signed into law on July 4, 2025, as an offset for other tax reductions.
Wagering down nearly 5% from 2025
The NTRA also tied the tax change to weaker wagering results. In the letter, the group said US pari-mutuel handle through June is down $45 million, or 4.7%, from the same period in 2025.
It further argued that if that pace continues through the end of the year, 2026 would post the largest single-season decline since 2011. Wagering on US thoroughbred racing has decreased each year from 2022 through 2025.
That does not prove the tax change alone caused the drop. But it does show why the issue is getting attention from racing stakeholders and lawmakers.
Bills to restore 100% deductions have not advanced so far
Bills to restore the deduction to 100% have been introduced in both the House and Senate. In the House, Rep. Andy Barr introduced HR 4630 last year, and the bill picked up two Democratic and two Republican co-sponsors before being referred to the House Ways and Means Committee.
According to the NTRA letter, House Ways and Means Committee Chairman Jason Smith supports restoring the deduction. The letter also describes the effort as bipartisan.
The next question is whether Treasury or the IRS will formally support the legislation.
Until there is movement in Congress or from federal regulators, this remains a policy fight to monitor rather than a finalized change. As always, anyone gambling should understand the tax rules that apply to their play and gamble responsibly.
Based on reporting by Frank Angst for TrueNicks.
