U.S. House panel blocks FAIR BET Act, leaving 2026 gambling tax change in place

A U.S. congressional effort to restore full federal deductions for gambling losses has stalled after the House Rules Committee declined to advance the FAIR BET Act, leaving a scheduled gambling tax change set to take effect in 2026.

The Fair Accounting for Income Realized From Betting Earnings Taxation Act (FAIR BET Act) was blocked as a proposed amendment to the National Defense Authorization Act (NDAA) for 2026, preventing the measure from reaching a vote on the House floor. As a result, a reduction in allowable gambling loss deductions will apply beginning in the 2026 tax year unless Congress acts.

The bill was introduced by Representative Dina Titus, whose district includes Las Vegas and other major U.S. gaming hubs. The proposal sought to restore the longstanding federal practice that allows bettors to deduct 100% of documented gambling losses from winnings on their federal tax returns.

For decades, taxpayers who itemized deductions were permitted to offset gambling losses up to the amount of their winnings, ensuring that only net gains were taxed. The rule applied across legal wagering activities, including sports betting, poker, retail and real-money online casino games, and pari-mutuel betting.

That framework was altered by a provision in the One Big Beautiful Bill, which reduced allowable deductions to 90% of losses. Under the change, bettors could break even overall but still owe federal taxes. Tax analysts estimate the provision could generate roughly $1.1 billion in revenue over eight years.

Titus has described the deduction reduction as “a tax increase on Americans who gamble,” arguing it would result in people being taxed on income they did not earn. In remarks entered into the Congressional Record, she said the FAIR BET Act would prevent bettors from paying taxes on income they never earned and discourage players from turning to offshore and unregulated betting markets.

House leadership said the Republican-controlled Rules Committee declined to consider the amendment due to concerns about the fiscal impact of restoring the full deduction. Lawmakers also indicated that broader tax policy discussions could be a more appropriate forum for addressing the issue.

The decision has drawn responses from across the gambling industry. Industry groups argue that restoring the full deduction promotes fairness for recreational and professional bettors and supports the regulated gaming market. The National Thoroughbred Racing Association praised Titus’ leadership, saying the deduction is vital to the economic health of horseplayers and the broader racing ecosystem, and called the reduction harmful.

Bipartisan interest has also emerged. Some Republican lawmakers have expressed concern about the deduction change, and at a House Ways and Means Committee field hearing, Chairman Jason Smith said lawmakers on both sides are considering solutions before the cap takes effect.

The revised gambling winnings tax will apply starting in 2026, potentially leaving bettors who break even or incur net losses with taxable income. Tax professionals have advised gamblers, particularly frequent or professional bettors, to consult advisers as the new rules could complicate tax planning and compliance.

Following the Rules Committee’s decision, the FAIR BET Act’s future now rests with the House Ways and Means Committee and possible inclusion in future tax or budget negotiations. Whether Congress will reach a consensus on gambling tax reform before the 2026 tax year remains uncertain.