While President Trump’s “One Big Beautiful Bill” saw the industry successfully rally support for a number of its initiatives, it saw a setback in the area of gambling winnings but the National Thoroughbred Racing Association hopes that can be changed in the months ahead.
Jen Shah, a Lexington-based certified public accountant with Dean Dorton, noted in a July 6 column that racing secured an important victory as the bill makes permanent 100% bonus depreciation, which the NTRA and other industry groups had supported. In making 100% bonus depreciation permanent, it benefits and allows for planning by farms and owners, as qualifying property includes equipment, fencing, land improvements, barns, and most horse purchases (with some exceptions).
On the other hand, the bill includes a change that could negatively impact the industry’s economic engine of pari-mutuel wagering. As Shah noted, a deduction for wagering losses incurred is limited to 90% of these losses and is only allowable to the extent of gains from wagering transactions. This is down from 100% as previously, the only limitation was that wagering losses were allowable to the extent of wagering gains. This update applies to tax years beginning after Dec. 31, 2025.
In a release noting a number of industry-favorable changes in the bill that was signed into law July 4, the NTRA noted: “One concern is that the bill limits to 90% of the amount of gambling losses that can be claimed against winnings.”
This may not sound like much of a change, but consider the horseplayer who has $100,000 in winnings and $100,000 in losses in a given year. Under the current standards, this bettor could claim all of those losses against the winnings and would not owe any taxes on gambling proceeds. Under the standard that will begin in 2026, this bettor only will be able to claim 90% of his or her losses, which will result in only $90,000 that can be claimed in losses against those $100,000 in winnings.
Thus, the bettor will owe taxes on $10,000 in gambling earnings.
It’s conceivable that big bettors who actually lost money in their wagering in a given year actually could owe taxes on gambling income. Think of a player who has $300,000 in total gambling winnings but $320,000 in gambling losses. That player has finished down $20,000 for the year, but because only 90% of the losses can be claimed—a total of $288,000—the player would need to pay taxes on $12,000 in gambling winnings.
The NTRA also plans to work toward that goal. “While there are many victories for the horse racing industry in the (legislation), there is still work to be done to offset some losses by horseplayers in their ability to deduct tax losses,” it said in a statement. “The NTRA is committed to working on that fix moving forward."
The NTRA will see a powerful ally in those efforts as the American Gaming Association, in a statement to ESPN.com sent just before the bill's signing, largely praised the legislation but said it would work to return the 100% deduction of losses.
“We look forward to President Trump's expected signing and will work closely with Congress in the coming months to address the changes to wagering deduction losses and further modernize the tax code,” the AGA statement ended.
In 2018, Kentucky updated its state tax laws to completely eliminate bettors’ ability to claim losses against winnings. Under this scenario, a bettor who won $100 on, say, the first race at Keeneland and then proceeded to lose every other race and finish down $500 would have owed taxes on the $100 in winnings. That change was quickly revised in 2019 to restore the ability to claim 100% of losses against winnings.
