House Ways and Means Advances Nevada-Backed Bill to Kill "Phantom Income" Tax and Restore 100% Gambling Loss Deductions

WASHINGTON, D.C. / LAS VEGAS, NV — In a major legislative victory for Nevada’s resort economy and casino patrons nationwide, the House Ways and Means Committee voted 38–5 to advance legislation restoring the full, 100% federal income tax deduction for gambling losses.

The bipartisan breakthrough—approved during committee markup—marks the first decisive congressional action to repeal what gaming industry advocates and tax accountants have decried as an unfair “phantom income tax” since the restriction became law in July 2025.

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|       GAMBLING LOSS TAX DEDUCTION RESTORATION DOSSIER  |
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|  - Legislative Vehicle: Digital Asset Tax Certainty Act|
|  - Integrated Measure: FULL HOUSE Act Provisions       |
|  - Congressional Forum: House Committee on Ways & Means|
|  - Committee Vote Margin: 38–5 (Bipartisan Approval)   |
|  - Lead Nevada Sponsors: Rep. Dina Titus (NV-01),      |
|    Rep. Steven Horsford (NV-04), Rep. Susie Lee (NV-03)|
|  - Senate Companion Sponsors: Sen. Catherine Cortez    |
|    Masto (D-NV) & Sen. Ted Cruz (R-TX) [S. 2230]       |
|  - Core Mechanism: Restores 100% Tax Deduction on      |
|    Wagering Losses Against Winnings (Repeals 90% Cap)  |
|  - Emergency Relief: Blocks Automatic Cut to 80%      |
|    Deduction Scheduled to Take Effect Jan. 1, 2027     |
|  - Economic Target: Protects Strip Table Game Action,  |
|    Sportsbook Turnover & Commercial Casino Operators   |
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Repealing the 90% Deduction Cap

The legislative battle traces back to the summer of 2025, when omnibus federal tax legislation altered decades of established IRS precedent by capping wagering loss deductions at 90% of total winnings.

Under that structure, a player who won $100,000 but lost $100,000 over the course of a tax year could deduct only $90,000—leaving them liable for income taxes on $10,000 in phantom earnings despite breaking even.

The policy was slated to become even more punitive on January 1, 2027, when the allowable deduction was statutory scheduled to fall to 80%.

By incorporating the fix into the broader Digital Asset Tax Certainty Act, lawmakers eliminated the 10% penalty, ensuring taxpayers are taxed strictly on net gaming profits rather than artificial paper gains.

Nevada Coalition Presses for Rapid House Floor Vote

Representative Dina Titus (D-NV), whose congressional district encompasses the Las Vegas Strip and downtown Fremont Street, led the legislative effort for 14 months and called on congressional leadership to schedule a floor vote immediately.

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|             KEY VOICES ON TAX DEDUCTION REPEAL         |
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|  • Basic Tax Fairness: Prevents the IRS from assessing |
|    income taxes on money players did not take home     |
|  • Casino Retention: Gaming leaders warn deduction caps|
|    incentivize high-rollers to shift play offshore     |
|  • Senate Alignment: Cortez Masto & Cruz bipartisan    |
|    companion bill (S. 2230) primed for upper chamber   |
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“The FULL HOUSE Act is about basic fairness in the tax code,” said Representative Carol Miller (R-WV), a co-sponsor. “Americans should not be taxed on money they didn’t actually take home. By restoring the full deduction for gambling losses, this bill ensures the IRS treats taxpayers honestly and consistently.”

Ways and Means Chairman Jason Smith (R-MO) echoed those sentiments, noting that the compromise stops the IRS from taxing taxpayers who lost money overall.

With companion legislation backed by Senators Catherine Cortez Masto (D-NV) and Ted Cruz (R-TX) moving in the upper chamber, gaming trade associations are mobilizing to clear the bill before the general election recess.

Source: U.S. House Committee on Ways and Means Official Records, Las Vegas Sun Washington Bureau, American Gaming Association Legislative Briefings.