There has been considerable commentary—and a fair amount of alarm—about a provision in the One Big Beautiful Bill Act (“OBBBA”) that caps gambling-loss deductions at 90% of winnings, starting with the 2026 tax year. Forbes has covered it. Kiplinger has covered it. Members of Congress have introduced no fewer than three separate bills to undo it. Somewhere in all of that coverage, a different and much older question keeps getting lost: does any of this actually change what happens to a non-resident gambler’s winnings at a U.S. casino cashier’s cage?

Short answer: almost certainly not.

Longer answer: it depends on understanding that these are two separate regimes, and the fact that they share a news cycle does not mean they share a mechanism.

What Section 165(d) Actually Does

The OBBBA provision amends IRC §165(d), the statute governing how a taxpayer who itemizes deductions on Schedule A may offset gambling winnings with gambling losses. Before 2026, a taxpayer who itemized could deduct 100% of documented losses, up to the amount of winnings reported. Starting in 2026, that figure drops to 90%. The remaining 10% simply disappears—it cannot be carried forward, and it cannot offset other income. Some commentators have taken to calling it a tax on “phantom income.” That is a fair description.

That mechanism, however, is built entirely around the annual U.S. income tax return of someone itemizing deductions against income earned during the year. It has nothing to do—at least not directly—with the 30% withheld at the moment a non-resident collects a jackpot.

Why the Non-Resident’s Situation Runs on a Different Track

Most non-resident gamblers are not filing a U.S. return to itemize deductions against other income for the year. Their situation turns on a single moment: the casino or racetrack withheld 30% of gross winnings—or a treaty-reduced rate, where one applies—without regard to what happened earlier in the same session. What determines whether some or all of that withholding comes back is:

• Whether the gambler’s country of residence has a U.S. income tax treaty, and what that treaty says about gambling income specifically
• The per-session accounting method under IRS Notice 2015-21, which the Free-Pacheco litigation confirmed governs the calculation of actual gain or loss for withholding purposes
• Whether a Form 1040-NR was filed—or should be filed—to claim a refund of tax withheld in excess of the actual liability

None of that turns on the OBBBA’s 90% cap. That provision was written to address a different taxpayer entirely—the U.S. resident itemizer—not the withholding mechanics that determine what a visiting gambler walks away with.

What Actually Deserves a Non-Resident Gambler’s Attention in 2026

Two developments are more likely to affect a non-resident’s experience at the table this year than the 90% cap ever will:

• The Form W-2G reporting threshold for slot machine jackpots rises to $2,000 in 2026, up from the $1,200 figure that had gone unchanged for decades—fewer interruptions at the machine, though the underlying withholding analysis is unchanged.
• The FAIR BET Act, the FULL HOUSE Act, and the WAGER Act all remain pending in Congress as of this writing, each aimed at restoring the full deduction for U.S. resident itemizers. None of them, if enacted, would change a non-resident’s withholding or refund analysis—worth knowing as background, not worth losing sleep over.

The Takeaway

A headline about a “new 2026 gambling tax law” is not the same thing as a change in the law that governs your winnings. If you had 30% withheld at a U.S. casino or racetrack, the OBBBA’s 90% cap is very likely irrelevant to you. What is relevant is still your country of residence, whether a treaty applies, and whether your wins and losses were properly calculated on a per-session basis.

This blog is dedicated to explain how non-resident gamblers can obtain substantial U.S. tax benefits. Indeed, the author of the blog (Patrick W. Martin) has recovered multi-millions of dollars of gambling funds/taxes for his clients. In order to recover millions of dollars, he has (i) successfully filed claims for refund with the IRS, (ii) successfully sued the federal government for refunds against the IRS in federal courts, and (iii) successfully negotiated settlements with the Department of Justice, Tax Division, including with the DOJ, Tax Division, Appellate Section on cases appealed to the Federal Circuit.

This requires extensive knowledge of the complex U.S. federal tax laws, including the Chapter 3 withholding tax rules, case law as interpreted by the courts, the policies of the IRS, income tax treaties with 66 different countries, and how casinos in practice withhold and pay over taxes to the government. Importantly, complying with the law and challenging the IRS’ interpretation of the law and making good faith arguments for an extension, modification or reversal of existing law has been one of the keys to the success of the author.

An example of a non-resident gambler who ran afoul of the law and committed tax fraud in the tax refund process is demonstrated by a Toronto Gambler Sentenced for Falsifying Income Tax Returns. This pursuant to the press release of the Department of Justice where the Canadian was sentenced to prison last year (2023):

AUSTIN, Texas – A Canadian national was sentenced in federal court here Friday to serve 30 months in prison and pay $1,771,011.67 in restitution for making false statements on income tax returns.

According to court documents, William Henry Woo, 67, of Toronto submitted duplicate and inflated refund requests to the IRS Service Center in Austin as a Canadian citizen seeking automatically withheld gambling winnings.  In doing so, he defrauded the U.S. Department of Treasury of nearly $1.8 million in tax refund money from 2006 to 2010. Woo pleaded guilty to two counts of the nine-count indictment brought against him in October 2022.

See, Toronto Gambler Sentenced for Falsifying Income Tax Returns

The author of this blog is just down the interstate (I-35) from this U.S. Attorney’s office in Austin, Texas (Western District). He is based in the San Antonio, Texas office of the nationally ranked tax focused law firm of Chamberlain Hrdlicka. Managing international tax cases, tax challenges, tax refund suits against the government ethically and in accordance with the law or meritorious claims for an extension, modification or reversal of existing law is fundamental in having success as a non-resident gambler against the federal government.

The original indictment of Mr. Woo for filing false U.S. tax returns, and interference with the administration of the internal revenue laws of the Untied States can be reviewed below:

I have the privilege of reporting that one of my most important international tax cases against the IRS has resulted in a favorable result for my client this year 2015, a non-resident alien gambler.

The amount of the monies recovered in favor of the gambler was in excess of thirteen million and three hundred thousand U.S. dollars (US$13.3M)!

That’s correct.  This is not a typo.  This case demonstrates just how much in total monies can be available if the nonresident gambler understands the correct methods of bringing a suit for refund and recovering what can literally be millions of U.S. dollars, in the particular case.

Some gamblers may only be eligible for hundreds of thousands of U.S. dollars, in their particular case; or less, depending upon the particular factual circumstances.