Crypto Tax Bill Could Restore Full Gambling-Loss Deduction

The House Ways and Means Committee has advanced a bipartisan crypto tax bill that includes reversing the gambling-loss deduction limit enacted in the One Big Beautiful Bill. This measure would restore the full deduction for gambling losses, which had previously been reduced from 100% to 90%. The House action gives the proposal a legislative pathway, though it does not finalize the issue.

Momentum to restore the full deduction has faced obstacles, and attaching a fix to moving legislation is challenging. The gaming lobby is cautious, noting the gap between committee approval and enactment, as illustrated by a $100,000 win and $100,000 loss scenario where only $90,000 of losses could be deducted, potentially leaving a $10,000 tax burden.

The Digital Asset Tax Certainty Act, the legislation approved by the committee, aims to preserve a 100% deduction for wagering losses while maintaining the cap that deductions should not exceed winnings. The proposal would apply to taxable years beginning after December 31, 2025, providing relief for 2026 if enacted. Despite committee approval, the path to enactment remains uncertain due to competing legislative priorities, the limited congressional time before the year's end, and previous unsuccessful attempts to restore the full deduction.

The dispute over the 90% limit extends beyond a technical adjustment, as it affects the tax applied to net gains versus the remaining losses after the deduction cap. The One Big Beautiful Bill's reduction in the gambling write-off from 100% to 90% introduced the issue now being addressed by the committee-approved legislation.