Gambling enthusiasts aim for a turnaround in the decision regarding the increased taxation
The horse racing industry is working tirelessly to reverse a proposed tax change that could negatively impact horseplayers, according to industry lobbyist Shawn Smeallie. The change, which is part of the "Big Beautiful Bill," is currently under consideration and is specific to horse racing gambling winnings.
Under the proposed change, starting in 2026, deductible gambling losses would be capped at 90% of qualified losses. This means that losses could no longer be deducted equal to 100% of winnings, as is currently the case.
This change, if implemented, would affect all gambling winnings, including those from horse racing. Currently, all gambling winnings must be reported as taxable income to the IRS, regardless of whether a Form W-2G is received. Losses can be deducted only if they are itemized on Schedule A, but deductions cannot exceed gambling winnings.
Smeallie believes that the change could go into effect in 2026, but expects it to be rescinded. He anticipates a tax bill this fall to include language that would rescind the change to gambling winnings.
It's important to note that the legislation making this change was passed in July 2025 and is already scheduled to take effect in 2026. However, there is no indication from available information that this tax change on gambling winnings and loss deductions will be rescinded before 2026.
The leadership in horse racing, including Smeallie, is advocating for a change back to the previous standard of taxation. They are working to reverse the proposed tax change, hoping to protect horseplayers from the negative impact it could have.
In conclusion, while the proposed tax change regarding gambling winnings and losses, including those on horse racing, is currently under consideration for potential rescission, the current tax rules are in effect and planned changes are expected to be implemented as scheduled. The horse racing industry, however, remains hopeful that the change will be reversed.
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