Imagine you’re playing a game where you win and lose some money, like betting on a horse race or playing cards with your friends. Right now, if you win $100 but lose $100, you don’t have to pay extra money to the government because you didn’t really make any profit. You have broke even, so no taxes to pay to the IRS.

President Trump’s “Big, Beautiful Bill” changes this game for a certain percentage of horseplayers (more on that later). Starting in 2026, if you win $100 and lose $100, you can only tell the government about $90 of what you lost. So, it looks like you made $10, even though you didn’t, and you might have to pay taxes on that $10. This new rule makes it harder for people who gamble a lot to keep their money.

Who does the “Big, Beautiful Bill” really affect?

This rule mostly affects people who gamble a lot, like professional gamblers who make a living playing poker, betting on sports, or wagering on horse races. These are people who win and lose big amounts of money all the time. For them, this new tax could make it tougher to make money because they’ll owe taxes even if they don’t really come out ahead.

Is the average gambler affected?

If you’re just someone who bets a little bit—like putting $20 on your favorite football team, playing a few poker games with friends, or picking a horse at the races once in a while—this probably won’t affect you much. The average gambler doesn’t win or lose enough money for this new rule to make a big difference. It’s really aimed at people who gamble huge amounts, not casual players like most horseplayers fall into. In short, this bill makes taxes trickier for big-time gamblers starting in 2026, but if you’re just having fun with small bets, you probably don’t need to worry.

How the “Big, Beautiful Bill” Works for Profitable Bettors

Professional bettors are people who gamble for a living, wagering on sports, poker, or horse racing, and they usually end up with more money than they lose by the end of the year. The “Big, Beautiful Bill,” starting in 2026, changes how they report their gambling losses to the government for taxes.

Right now, if a pro bettor wins $100,000 in a year but loses $80,000, they only pay taxes on the $20,000 profit (because they can deduct the full $80,000 in losses). The new law says they can only deduct 90% of their losses. So, in this example:

They win $100,000.

They lose $80,000, but can only deduct 90% of that, which is $72,000.

Now, it looks like they made $100,000 – $72,000 = $28,000 in profit, even though their real profit is only $20,000.

They’ll have to pay taxes on that extra $8,000, which isn’t really profit. Not good!

Does It Affect Most Profitable Bettors?

Yes, it affects all professional bettors who have both wins and losses, even if they’re profitable. The bigger their losses (even with a profit), the more this rule hurts them because they can’t deduct as much. For example:

A bettor with small losses (say, wins $100,000, loses $10,000) only loses the ability to deduct $1,000 (10% of $10,000), so they pay taxes on an extra $1,000.

A bettor with big losses (wins $1,000,000, loses $900,000) can’t deduct $90,000 (10% of $900,000), so they pay taxes on an extra $90,000, which is a huge hit!

So, even though they’re still making a profit, they’ll owe more taxes than before, which cuts into their earnings.

However, non-professional bettors who turn a profit on the year are likely not affected, unless they report all the gambling income.

Why It Matters

For pros, gambling is their job, and this law is like the government taking a bigger slice of their paycheck. It doesn’t stop them from being profitable, but it makes it harder to keep as much of their money. The ones who lose a lot while still winning overall will feel it the most.

In short, starting in 2026, profitable professional bettors will pay more taxes because they can’t deduct all their losses, even if they come out ahead. The bigger their bets (and losses), the more this new rule will sting!

Let’s clear up how the “Big, Beautiful Bill” and Schedule C fit together for gamblers.

What’s a Schedule C?

A Schedule C is a form you fill out when you file your taxes if you’re running your own business. Professional gamblers—people who bet on sports, poker, or horse racing as their main job—often file a Schedule C because gambling is their business. They use it to report their gambling winnings as income and deduct their gambling losses (and other business expenses, like travel or equipment).

Related: Trump attending the 2022 Kentucky Derby

Does the “Big, Beautiful Bill” Only Affect Schedule C Filers?

The “Big, Beautiful Bill,” starting in 2026, limits gambling loss deductions to 90% of what you lose. This rule applies to anyone who deducts gambling losses, but how it affects you depends on whether you file a Schedule C (as a professional gambler) or not (as a casual gambler).

Professional Gamblers file Schedule C, as Pros report gambling as their business on this common tax form. They report all their winnings as income and deduct their losses (up to their winnings) as a business expense.

The new law means they can only deduct 90% of their losses. For example, if they win $100,000 and lose $80,000, they can only deduct $72,000 (90% of $80,000). They’ll pay taxes on $28,000, even though their real profit is $20,000.

Since pros often have big wins and big losses, this 10% reduction can mean a lot more taxes, especially for those with large betting volumes.

Casual Gamblers don’t file Schedule C. If you’re just betting for fun (not as a job), you don’t file a Schedule C. Instead, you report gambling winnings as “other income” on your tax return and deduct losses as an “itemized deduction” on Schedule A (if you itemize).

The new law still applies: you can only deduct 90% of your losses, up to your winnings. So, if you win $5,000 and lose $5,000, you can only deduct $4,500. That means you’ll owe taxes on $500, even though you broke even.

Most casual gamblers don’t itemize (they take the standard deduction instead), so they might not deduct losses at all. In that case, the new law doesn’t affect them because they’re not claiming losses anyway.

Do You Have to File a Schedule C for It to Affect You?

No, you don’t have to file a Schedule C for the law to affect you. It impacts anyone who deducts gambling losses, whether they’re a pro (using Schedule C) or a casual gambler (using Schedule A). However, Professional gamblers (Schedule C filers) are more likely to feel the impact because they deduct losses regularly as part of their business, and their losses are often much larger.

Casual gamblers are less affected, especially if they don’t itemize deductions or have small losses. If they don’t deduct losses, the law doesn’t change anything for them.

Here’s when a horse racing bettor has to report their gambling income to the IRS (the tax people):
1. When You Get a W-2G Form
If you win a big amount betting on a horse race, the racetrack or betting place might give you a form called a W-2G. You have to report this money as gambling income on your taxes. You’ll get a W-2G if your winnings are $600 or more and at least 300 times your total bet. For example, if you bet $2 and win $600 or more, you’ll get a W-2G.

Examples:
Bet $5 and win $2,500? That’s over 300 times your bet, so you get a W-2G, and you must report it.
Bet $10 and win $500? That’s only 50 times your bet and under $600 return, so no W-2G, and you don’t have to report it (but read on!).

The racetrack sends a copy of the W-2G to the IRS, so they know you won, and you need to include this on your tax return. Thanks to the withholdings changes passed back in 2017, very few W-2Gs are now generated, and that has been a huge homerun for the sport.  [Shout out to my friends Chris, Judy, Keith and others who were instrumental in getting this passed!]

2. When You’re a Professional Gambler
If horse racing is your job (you bet a lot and make a living from it), you’re considered a professional gambler. You must report all your gambling winnings as income, even if you don’t get a W-2G. You put this on a Schedule C form (like a business report) because betting is your business. You also get to deduct your losses (up to the amount you won), but the “Big Beautiful Bill” (starting in 2026) means you can only deduct 90% of those losses.

3. When You Win Any Money (Even Without a W-2G)
Even if you don’t get a W-2G, the IRS says you’re supposed to report all gambling winnings as income, no matter how small. For example: You bet $10 on a horse and win $50? You should report that $50 as “other income” on your taxes, even if there’s no W-2G. But, who does that? Pretty much nobody.

The IRS counts any money you win from gambling as income, whether it’s from horse racing, sports betting, or a lottery ticket.

But here’s the thing: if your winnings are small and you don’t get a W-2G, the IRS might not know about it unless you report it. Many casual bettors don’t report tiny wins, but technically, you’re supposed to.

4. When You Itemize Deductions (Casual Bettors)
If you’re not a pro but you want to lower your taxes by deducting your gambling losses, you have to report your winnings first. Casual bettors can deduct losses (up to the amount they won) on a Schedule A form, but only if they “itemize” their deductions (instead of taking the standard deduction).

For example: You win $1,000 betting on horses and lose $800. You report the $1,000 as income and deduct the $800 loss on Schedule A (or $720 starting in 2026 because of the “Big Beautiful Bill”).

If you don’t itemize, you still have to report the $1,000, but you can’t deduct the losses.

Key Points for Horse Racing Bettors

Casual bettors: You must report winnings if you get a W-2G (big wins that exceed $600 and 300x your total bet). You should report all winnings as “other income,” but small wins without a W-2G are often overlooked unless you’re deducting losses.

Professional bettors: You report all winnings as business income on Schedule C, no matter the amount, because betting is your job.

Deducting losses: You can only deduct losses if you report your winnings and either file a Schedule C (pros) or itemize on Schedule A (casual bettors). Starting in 2026, the “Big Beautiful Bill” limits losses to 90% for everyone.

A horse racing bettor reports gambling income:
* When they get a W-2G for big wins.
* If they’re a pro gambler reporting all winnings on Schedule C.
* For any winnings (even small ones) as “other income,” especially if they want to deduct losses.
If you’re just betting small amounts for fun and don’t get a W-2G, you’re supposed to report every win, but it’s the big wins and pro bettors that the IRS really focuses on!

Why Most Horse Racing Bettors Might Not Be Affected

Casual Bettors: Most people who bet on horse races are casual bettors, placing small wagers for fun (like $20 on a race). They often don’t itemize deductions on their taxes because the standard deduction ($14,600 for singles, $29,200 for married couples in 2025) is usually higher than their total itemizable expenses. If they don’t itemize, they can’t deduct gambling losses, so the new law doesn’t change anything for them.

Low Winnings: Many casual bettors don’t win enough to trigger a W-2G (winnings of $600+ at 300x the bet) or report small wins, especially if they don’t get a form. The IRS might not know about these winnings, and many casual bettors don’t report them.

Losses Exceed Winnings: Over 90% of sports bettors (and likely horse racing bettors, as the betting structure is similar) lose money overall each year. If they’re not reporting winnings (because they have none or don’t report small ones), they’re not deducting losses either, so the law doesn’t affect them.

Who Is Most Affected by the Big, Beautiful Bill?

Professional Horse Racing Bettors: These are folks who bet on horses for a living, filing Schedule C to report winnings and deduct losses. They often bet large amounts and have both big wins and big losses. The new law means they can only deduct 90% of their losses, increasing their taxable income even if their real profit stays the same. For example, a pro who wins $500,000 and loses $400,000 would pay taxes on $36,000 more than they actually made.

High-Volume Casual Bettors: Some non-professional bettors who bet big (e.g., “whales,” “CAWs, or “VIPs”) and itemize deductions on Schedule A will also be affected. They report winnings and deduct losses, so the 10% cap will increase their taxes.

Computer Betting Teams: Some horse racing bettors use sophisticated computer models to place high-volume bets (like syndicates or teams). These groups often have small profit margins (e.g., 4-10% ROI). The new law could hit them hard by taxing them on 10% of their losses, potentially wiping out their profits or making their business unviable.

Estimating the Percentage of Horseplayers Affected

Casual Bettors: My 30+ years of working in the ADW space says that over 95% of horse racing bettors lose money annually, and fewer than 0.6% report gambling income to the IRS. Most casual bettors don’t itemize (only about 20-30% of U.S. taxpayers itemize, and even fewer casual bettors do because their losses are small). Even fewer U.S. citizens now itemize due to Trump raising the standard deduction back during his first term, and the “Big, Beautiful Bill” extends the term of those deductions. Possibly 3-5% of horse racing bettors itemize and deduct losses, and only they would be affected. If anything, I would say those percentages are high.

Professional Bettors: Professional gamblers are a tiny group—estimated at 10,000 to 20,000 across all gambling in the U.S., including poker, sports, and horse racing. Horse racing pros are likely a small fraction of that, maybe 1,000-2,000 people. Compared to the hundreds of thousands who regularly bet on horses, pros are less than 1% of bettors.

High-Volume Bettors and Teams: Computer teams and high-stakes bettors are also a small group, but they’re significant in horse racing because they drive a lot of betting volume, in many cases well over 40-percent of the handle. They represent less than 1 percent of bettors given their specialized nature.

Realistic Guess of Horseplayers Affected
Adding these up:
Casual bettors who itemize and deduct losses: 3-5%.
Professional bettors: <1%.
High-volume or computer team bettors: <1%.

A realistic estimate is that roughly five percent of horse racing bettors are affected by the law change. This includes:
Most professional bettors (a tiny group).
Some high-volume casual bettors who itemize.
Computer betting teams, who face the biggest impact due to their high losses and thin margins. Sorry CAWs

The vast majority (~95%) of casual bettors who don’t itemize, don’t report winnings, or lose money overall won’t notice a difference. The law hits hardest at pros and high-stakes bettors, who are a small but important part of the horse racing betting ecosystem.

Bottom Line

The “Big Beautiful Bill” affects anyone who claims gambling losses on their taxes, starting in 2026, whether they file a Schedule C (pros) or not (casual gamblers who itemize). But it hits professional gamblers and CAWs harder because they rely on deducting large losses to lower their taxes. For them, it’s not very beautiful. If you’re a casual horseplayer who doesn’t deduct losses, you won’t notice any change.