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.