A new federal bill, informally called “The One, Big, Beautiful Bill,” is making headlines for its potential in transforming taxation on gambling winnings in the US. Advanced by the House Committee on Ways and Means, the bill is a part of a broader package of reforms covering taxes, social programs, defence, and immigration. However, for gamblers, both professional and casual, tax provisions could have far better consequences.
Stricter Limits For Professional Gambling Winnings
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One of the bill’s most significant changes is its clarification and codification of how gambling-related deductions work. Under current laws, taxpayers can only deduct gambling losses up to the amount of their gambling winnings. The new bill reaffirms the rule and also states that all gambling-related expenses, including travel, lodging, and meals, are subject to the same limitations.
This is crucial for professional gamblers, who often treat gambling as a business and have claimed a variety of expenses. For example, if a professional gambler earns $50,000 in winnings, they can not deduct more than $50,000 in total expenses, regardless of how much they spent. Any additional expenses, even if legitimate, are non-deductible. This increases taxable income for many professionals.
Relief For Casual Gamers
On the other hand, the bill brings relief in terms of gambling winnings for casual gamblers. It repeals a controversial rule from the American Rescue Plan Act of 2021, which required a third-party payment processor like Venmo or PayPal to issue IRS Form 1099-K for anyone earning over $600, regardless of transaction count. The new bill restores the previous threshold. ” A 1099-K is now only required if the payment exceeds $20,000 and involves more than 200 transactions.
While the bill has cleared initial challenges in the House, its future is uncertain. Some senators criticise it, while some suggest revisions may be needed. Whatever happens, we are here to update, so stay tuned!
Also Read: Finnish Gambling Reforms Spark Harm Concerns
