Most bettors think a loss is a loss — write it off, move on. The IRS disagrees, and starting tax year 2026 the rules get tighter. Here is exactly how the deduction math works, why the standard deduction kills your ability to offset losses, and what that means for every bonus wager you place.
Can you deduct gambling losses on your federal return?
Yes, but only under specific conditions that most recreational bettors cannot meet. Gambling losses may be deducted only if you itemize on Schedule A, and only up to the total amount of your gambling winnings — not your net loss. If you lost $3,000 on bonus wagers but won $1,000 elsewhere, your maximum deduction is $1,000, not $3,000. The $2,000 excess simply disappears for tax purposes.
Then there is the standard deduction trap. If you claim the standard deduction — which the vast majority of US filers do — you cannot deduct gambling losses at all. You report every dollar of winnings as ordinary income and get zero offset. That is a material hit if you ran through a welcome bonus and came out behind.
What changes in 2026?
Starting tax year 2026, the deduction gets capped further: bettors will only be able to deduct 90% of gambling losses up to the amount of winnings. So even if you itemize and have $5,000 in winnings to offset, the most you can deduct against those winnings is $4,500. The remaining 10% is permanently non-deductible. That is a new floor on your tax exposure regardless of how meticulous your records are.
Do bonus bets affect your taxable income?
They can. Cash bonuses count as income. DraftKings' own formula defines net earnings as cash winnings minus cash entry fees, plus cash bonuses — and net earnings over $600 trigger a Form 1099-MISC straight to the IRS. If a sportsbook hands you a $200 cash bonus and you clear it, that $200 is income before you bet a single dollar of it. For a full breakdown of how welcome offers interact with your tax bill, see Sportsbook Bonus Taxes: What US Bettors Owe on Welcome Offers.
Does your state matter?
Absolutely. Florida and Nevada levy no individual state income tax on gambling winnings, which removes the state-level layer entirely for residents of those states. Everyone else faces state income tax on top of federal rates. Legality and tax treatment vary by jurisdiction — always confirm your state's rules before assuming any deduction strategy applies to you.
How do the deduction rules compare across filing situations?
| Filing Situation | Can Deduct Losses? | 2025 Rule (pre-2026) | 2026 Rule (new cap) |
|---|---|---|---|
| Itemizes on Schedule A | Yes, up to winnings | 100% of losses up to winnings | 90% of losses up to winnings |
| Claims standard deduction | No | Zero deduction allowed | Zero deduction allowed |
| Florida or Nevada resident (itemizing) | Yes, federal only | No state tax on winnings; federal loss deduction applies | No state tax on winnings; 90% federal cap applies |
What records do you need to keep?
The IRS requires an accurate diary of all winnings and losses — date, location, type of wager, amounts. Bonus bets complicate this because the stake is non-withdrawable; only net winnings come back as real cash. Keep screenshots of every bonus offer you accept and every bet slip tied to it. Sloppy records mean no deduction if you get audited.
Common questions about bonus loss deductions
- Can I deduct losses from bonus bets specifically?
- The IRS does not separate bonus-funded losses from cash-funded losses. All gambling losses go into the same Schedule A bucket, subject to the same caps and itemization requirement.
- What if a sportsbook withholds 24% from my winnings?
- Withholding satisfies a tax payment, not your filing obligation. You still report gross winnings as income and claim losses separately — you cannot net them before reporting.
- Does this apply in every legal betting state?
- Federal rules apply nationwide. State treatment varies. Check your state's revenue department for its own loss-deduction rules, which may differ from federal law.
Before you chase a big welcome offer, understand what you are actually keeping after taxes. For common bonus mechanics that affect your tax picture, read the Sportsbook Bonus FAQ: Wagering Requirements, Expiry & Taxes. If you want to see which offers are worth pursuing right now, the Best Sportsbook Welcome Bonuses Ranked for New US Bettors breaks down current promos side by side. For one specific deep dive, the FanDuel Sportsbook Welcome Bonus: Full Review & Claim Guide walks through exactly what you claim and what it costs you at tax time.
21+ and present in a state where sports wagering is legal. Gambling problem? Call 1-800-GAMBLER.