Gambling Loss Deduction 2026: Do Sweeps Losses Count?

The House Ways and Means Committee voted 38-5 on September 16 to restore the full deduction for gambling losses up to winnings, but the 90% cap still governs your 2026 return, and nothing in the tax code settles whether a sweepstakes casino loss is a wagering loss at all.

That was a committee vote, not a law, so the rule your 2026 return runs on is still the 90% cap that took effect in January. The casino and sportsbook trade press covered the September 16 vote as a win for bettors, which it is. What none of that coverage worked through is what it means for the sites that pay US players in gift cards and bank transfers. Here is the chain, document by document.

What did the House Ways and Means Committee vote on?

The Committee on Ways and Means met at 10:00am ET on September 16 in HVC-210 and marked up seven bills. One of them was H.R. 10357, the Digital Asset Tax Certainty Act, a 114-page crypto tax bill whose last two pages have nothing to do with crypto: Title VII, headed "FULL HOUSE ACT", containing one section, "Sec. 701. Reinstatement of rules for wagering losses."

That title was in the bill as introduced, not added at the markup. We checked the introduced text against the substitute Chairman Smith offered, and section 701 is word for word identical in both. The Joint Committee on Taxation's description of the substitute, JCX-50-26, lists its only changes as replacing the phrase "date of the introduction of this Act" with "September 14, 2026" in six places.

The substitute passed by voice vote. The bill was then ordered favorably reported by a roll call of 38 yeas to 5 nays. The committee's own vote sheet records the five nays as Doggett, Chu, Moore (WI), Beyer and Evans, with Gomez and Suozzi recorded in no column at all. That is a committee step, not a law. It still has to clear the House floor, the Senate and the President.

What does H.R. 10357 change about wagering losses?

Section 701 replaces Internal Revenue Code section 165(d) in full. The new subsection reads: "Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions. For purposes of the preceding sentence, the term 'losses from wagering transactions' includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction." The effective date clause applies it to taxable years beginning after December 31, 2025, which is the tax year most people are living in right now.

That wording matters because of what it removes. The One Big Beautiful Bill Act, Public Law 119-21, section 70114, had rewritten the same subsection so the deduction "shall be equal to 90 percent of the amount of such losses" and only up to your winnings, on the identical effective date. So both the cut and the proposed repair land on tax year 2026.

One quiet difference sits under the word "reinstatement". The version of 165(d) in force until this year folded wagering-related expenses into the loss cap only "in the case of taxable years beginning after December 31, 2017, and before January 1, 2026". Section 701 drops that sunset and makes the inclusion permanent. That matters to people who gamble as a trade or business. It does not change the arithmetic for anyone redeeming Sweeps Coins.

Why might this not help sweepstakes players?

Both versions of section 165(d) turn on one phrase: "losses from wagering transactions." Neither version defines "wagering transaction", and the code does not define it anywhere else either. Two provisions pull the answer in opposite directions.

On one side is the argument the operators themselves make. The no-purchase-necessary structure that lets these sites run in most US states rests on the position that nothing is risked, which is the prize-chance-consideration test our guide to why sweepstakes casinos are legal sets out at length. WOW Vegas opens version 30.0 of its SC Game Rules, published September 9, 2026, with "THE WEBSITE, PLATFORM AND/OR GAMES DO NOT OFFER REAL MONEY GAMBLING OF ANY TYPE." On that reading there is no wagering transaction, so there is no wagering loss, and a bill restoring the wagering-loss deduction has nothing to restore.

On the other side is the code's own withholding rule. Section 3402(q)(3)(C)(i) sets a withholding threshold for proceeds over $5,000 from "a wager placed in a sweepstakes, wagering pool, or lottery." Congress wrote that clause on the assumption that a wager can be placed in a sweepstakes. So the flat claim that a sweepstakes entry can never be a wager does not survive contact with the statute, and anyone telling you the answer is settled in either direction is ahead of the documents.

The same characterisation is contested outside the tax code, under state gambling law rather than the IRC. Count I of Florida's two sweepstakes complaints asks a court to forfeit every dollar people in Florida wagered on the sites the state sued, which only works if those dollars were wagered at all. Nothing a state court decides there binds the IRS, and none of it changes section 165(d). It does show that "is this a wager" is a live question in more than one forum.

The IRS guidance does not close it. Topic no. 419, last updated June 11, 2026, says gambling income "includes but isn't limited to winnings from lotteries, raffles, sports betting, horse races, and casinos." Sweepstakes are not in that list, and the list is explicitly not exhaustive. That is a genuine gray area rather than a closed door, which is how our sweepstakes casino taxes guide has described it, and nothing in this week's vote changes it.

One line from Topic 419 is worth more to most readers than the whole bill: "You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses." If you take the standard deduction, the 90% cap never touched you and the repair will not either.

Do sweepstakes casinos tell you any of this?

No. We pulled the full article inventory from the nine sweepstakes help centres we can read on September 22, 2026: Pulsz, Pulsz Bingo, McLuck, Hello Millions, PlayFame, Spree, Jackpota, SpinBlitz and Mega Bonanza. That is 569 published articles covering verification, purchases, redemption rails and locked accounts.

Across all 569, the word "tax" appears exactly once, in a PlayFame article on verification documents that lists "tax returns" alongside pay stubs and asset summaries as papers the operator may ask a high spender for to prove source of funds. The strings "1099" and "IRS" appear zero times. Nine brands, 569 help articles, not one sentence about what you owe on a redemption.

The rulebooks are blunter. WOW Vegas states in its SC Game Rules that the "Sponsor/Promoter is not responsible for any taxes or fees associated with a prize redemption. Participants are responsible for all applicable taxes and fees associated with prize receipt and/or redemption." Clause 17 of its Terms and Conditions, version 9.0 of July 23, 2026, carries a subheading reading "No legal or tax advice" and says MW Services Limited "does not provide advice regarding tax and/or legal" matters, with players "responsible for any and all tax liability from the use of the Website."

That is a fair position for an operator to take. It also means the paperwork is entirely yours.

What should you do before you file your 2026 return?

Four steps, in the order they matter:

1. Value every redemption in dollars, gift cards included. A card is not exempt because it is not cash: section 3402(q)(4)(B) values non-cash proceeds "at their fair market value", and a $400 card is $400 of income whether or not any form arrives.
2. Build the record Topic 419 asks for, now rather than in April. Log the date, the amount and the rail for every redemption you take, and keep the receipts and statements behind them. Our guide to redeeming Sweeps Coins covers where those records live in each cashier.
3. Track purchases separately from free-entry play. The difference between Gold Coins and Sweeps Coins is the difference between a non-redeemable balance and a redeemable one, and only one of them ever becomes money.
4. Take the whole file to a CPA, and take the two statutes above with it. Section 165(d) is the deduction question; section 3402(q) is the reason it is open.

We test redemption speeds at the highest-payout sweepstakes casinos and we are not tax advisers. The honest summary is that Congress spent September 16 repairing a deduction nobody has established sweepstakes players can claim, and whether you can claim it is a question for a professional with your return in front of them, not for a review site.

Sources & documents

• House Ways and Means markup of H.R. 10357, September 16, 2026
• H.R. 10357 as introduced (PDF, Title VII at pages 113-114)
• Amendment in the Nature of a Substitute to H.R. 10357 (PDF, Title VII at pages 113-114)
• Joint Committee on Taxation description of the substitute, JCX-50-26 (PDF)
• Votes of the Committee, H.R. 10357 final passage 38-5 (PDF)
• Public Law 119-21, section 70114, limitation on wagering losses
• 26 U.S.C. 165(d) as it read before 2026
• 26 U.S.C. 3402(q), withholding on wagers placed in a sweepstakes
• IRS Topic no. 419, Gambling income and losses
• WOW Vegas SC Game Rules version 30.0, September 9, 2026
• WOW Vegas Terms and Conditions version 9.0, July 23, 2026

Help-centre article counts were taken from each brand's public Zendesk article inventory on September 22, 2026: Pulsz, McLuck and PlayFame among them.

21+. This article reports a committee vote and the documents behind it; it is not legal or tax advice for your return - talk to a CPA before you rely on any of it. Play should stay fun regardless of balance size. Problem? Call or text 1-800-GAMBLER. Responsible gaming resources.