If you cashed a poker tournament for $5,000 net or more this year, the casino has already told the IRS β Form W-2G is on file. And starting tax year 2026, even a recreational player who breaks even on poker can owe federal income tax, because of a single line buried in last year's omnibus tax legislation. This guide walks through the 2026 rules, what changed, and where the new mistakes are.
Disclaimer: This article provides general information about U.S. poker taxation as of 2026. It is not tax, legal, or financial advice. Tax rules vary by personal circumstances and change over time. PokerCharts is not a tax advisor and disclaims liability for any decisions made based on this content. Consult a qualified U.S. tax professional for guidance specific to your situation.
TL;DR: The IRS treats poker winnings as ordinary income. Starting tax year 2026, the One Big Beautiful Bill Act caps gambling-loss deductions at 90% of losses (still capped at winnings) β for both recreational filers (Schedule A) and professionals (Schedule C). A break-even player now owes tax on roughly 10% of winnings as "phantom income." Records, classification choices, and timing all matter more than they used to. State rules vary, and not all states will conform to the new federal cap.
How the IRS classifies poker winnings
Poker winnings are reported as gambling income on Form 1040 Schedule 1, line 8b ("Gambling"). Cash games, online cash, sit-and-gos, and multi-table tournaments are treated identically β there is no preferential rate for tournaments and no capital-gains treatment for any form of poker. The amount you report is your gross winnings for the year.
How you handle losses depends on whether you file as a recreational player (Schedule A itemized deduction) or as a professional player (Schedule C, as a trade or business under Commissioner v. Groetzinger, 480 U.S. 23 (1987)). Pre-2026, both paths allowed loss deductions up to the amount of winnings. Both paths now share a new haircut: the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, caps gambling-loss deductions at 90% of losses starting tax year 2026. The cap applies to both filing approaches, and the disallowed 10% does not carry forward to future years.
The W-2G trigger for tournaments
Casinos and cardrooms in the U.S. file Form W-2G with the IRS β and hand you a copy β when your poker tournament net winnings exceed $5,000 (gross prize minus the buy-in). The threshold is per-tournament, not per-day. If the cardroom doesn't have your taxpayer identification number on file, they may apply backup withholding at 24% on the spot.
Cash games do not generate W-2Gs regardless of the amount, and online poker sites typically do not issue W-2Gs to U.S. residents either. That doesn't mean those winnings are tax-free β it just means the reporting burden falls entirely on you. The IRS receives W-2Gs from the cardrooms; if your reported gambling income is less than the W-2Gs they received, expect a CP2000 notice.
Recreational players: Schedule 1, itemization, and the new 90% rule
If you play casually, you report your gross winnings on Schedule 1. To deduct any losses, you must itemize on Schedule A. Two limits then apply.
The first limit is unchanged: your gambling-loss deduction can never exceed your gambling winnings for the year. You cannot net winnings against losses on Schedule 1 β you gross up first, then deduct on Schedule A.
The second limit is new for tax year 2026. Under the OBBBA 90% cap, your deduction is the lesser of (a) 90% of your verified losses or (b) the amount of your winnings. Combined, the rule produces a small but unavoidable taxable amount even when you broke even. A player who wins $100,000 and loses exactly $100,000 β a true break-even year β must report $100,000 of winnings but can only deduct $90,000 of losses, leaving $10,000 of phantom taxable income. At a 24% marginal federal rate, that's $2,400 of federal tax owed on a year that produced no actual profit.
The 90% cap has prompted bipartisan repeal efforts and there's a real chance it gets unwound before most filers feel it. As of now, it's law. Plan for it.
Then there's the older trap that hasn't gone away: most filers take the standard deduction because it exceeds their potential Schedule A itemized total. If you take the standard deduction, your gambling losses produce zero tax benefit β even though your winnings are still fully taxable. A casual player who wins $20,000 and loses $19,000 in the same year (net profit $1,000) could end up paying tax on the full $20,000 if they take the standard deduction. Whether itemizing makes sense depends on your overall return; many recreational players are still better off taking the standard deduction even after OBBBA, because their other Schedule A items don't push them past the standard deduction threshold.
Professional players: Schedule C, SE tax, and the 90% bundle
If poker is your trade or business under Groetzinger, you file Schedule C. You report gross winnings as gross income and deduct ordinary and necessary business expenses: tournament buy-ins, travel, lodging while playing, coaching, software (including PokerCharts), and a home-office allocation if applicable. Net Schedule C profit flows to your 1040 and is also subject to self-employment tax β 12.4% Social Security up to the SS wage base, plus 2.9% Medicare, for a combined SE rate around 15.3%.
Pre-OBBBA, the trade-off was straightforward: professionals deducted losses without itemizing and deducted ordinary business expenses, paid for with SE tax that recreational players don't owe. Post-OBBBA, the 90% cap applies to Schedule C filers too β and it bundles wagering losses with related business expenses for the calculation, with the bundle capped at 90% and then capped again at total winnings.
A worked example: a profitable professional player has $200,000 in winnings, $150,000 in wagering losses, and $30,000 in business expenses. Pre-OBBBA, the deduction is $180,000 ($150K + $30K), producing $20,000 of net Schedule C income. Post-OBBBA, the deduction is the lesser of 90% of $180,000 ($162,000) or winnings ($200,000), so $162,000 β producing $38,000 of net Schedule C income. The 90% cap costs roughly $18,000 of additional taxable income for that filer, plus self-employment tax on top.
The arithmetic depends on the size of your losses and expenses relative to winnings. Talk to a CPA who has poker clients before deciding whether professional status now makes sense for your situation. The classification question matters more under OBBBA than it did before.
The session method
For reporting purposes, the IRS allows a "session" method rather than hand-by-hand or table-by-table accounting. A session is a continuous period of play in a single game type at a single venue. You report the net of each session β winning sessions are gross winnings, losing sessions are gross losses for itemization purposes. The session method is referenced in IRS Chief Counsel Advice and in Shollenberger v. Commissioner, T.C. Memo 2009-306. It's especially useful for cash-game players whose hand-level results would be impossible to track.
The session method matters more under OBBBA. Larger gross-loss totals mean a larger 90% deduction. If two recreational players have identical net results but one nets per-hand and the other nets per-session, the per-session player's gross losses are larger, and 90% of that larger figure is a larger deduction. The mechanics are technical β what defines a "session," how to handle interruptions, online vs live treatment β and the wrong call can trigger an audit. Consult a CPA who knows poker before relying on it.
State taxes vary, and not all states conform to OBBBA
Nine states have no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. (Washington added a 9.9% tax on income exceeding $1 million annually in March 2026, which affects only the small fraction of poker players whose income clears that threshold.) These states don't tax poker winnings either; cardroom cashes collected in-state are state-tax-free.
States with income tax all tax gambling winnings as ordinary income, but treatment of losses varies. Connecticut, Illinois, Indiana, Kansas, Louisiana, North Carolina, Ohio, Rhode Island, Vermont, and Wisconsin do not allow gambling-loss deductions at the state level β meaning you owe state tax on gross winnings even if you reported losses on your federal return. For players in those ten states, the state return effectively pre-OBBBAs you: zero loss deduction at all. The OBBBA 90% federal cap layered on top is a separate hit on your federal-return arithmetic.
State conformity to the OBBBA federal change is in flux as of 2026. Some states automatically conform to federal tax law (their state code ties to the IRC) and will pick up the 90% cap unless they pass legislation rejecting it. Others operate under their own rules. Expect this to be one of the most state-by-state-variable parts of the new tax landscape.
If you cash in a state where you don't live (think tournament series in Las Vegas if you're from California), you may owe non-resident state tax in the cash state and get a credit on your home-state return. The cardroom withholds based on the cash state's rules. Cross-state poker creates the most surprises at filing time.
Records the IRS expects (and OBBBA makes more valuable)
Whether you're recreational or professional, the records that protect you in an audit are the same: date, location, type of game, buy-in, cash-out, time played, and supporting documents (cage receipts, W-2Gs, bank records, witnesses where relevant). The IRS publishes detailed expectations in Publication 529 and Topic 419.
Under OBBBA, contemporaneous records are worth more dollars-per-page than they used to be. A reconstructed loss is a vulnerable loss; a vulnerable loss disallowed under audit is now disallowed under both the winnings cap and the 90% cap. The cost of weak documentation has gone up. The single most common mistake remains no contemporaneous record. Reconstructing a year of sessions in April from memory is a losing strategy β you will under-report something or over-report something, and the 90% cap penalises every loss you can't substantiate.
How PokerCharts helps with tax season
PokerCharts logs every session at the moment it happens β date, venue, game type, buy-in, cash-out, time. The jurisdiction-aware tax reporting feature generates an annual summary built specifically for U.S. filers: gross winnings, gross losses, W-2G aggregation, expense categories tied to Schedule C lines, and session-detail CSV export your CPA can drop straight into a tax-prep workflow. Recreational players get the Schedule 1 / Schedule A view; professionals get Schedule C with expense categorization. The jurisdiction setting is per-account, so you only choose it once.
For tax season specifically, players often run PokerCharts on a laptop alongside their tax software β the web-based interface handles CSV exports, expense reviews, and W-2G cross-checks faster than the mobile app. There's nothing to install; sign in on the laptop where your tax software lives.
PokerCharts is free for your first 10 sessions and then $1.99/month on the annual plan ($23.95/year β our cheapest tier). If you've already had a year of poker behind you, the import flow brings PT4, Pokerbase, BINK, Poker Bankroll Tracker, Poker Income, and 11 other formats into a single session log.
Outside the US
If you split time between the U.S. and the UK, the rules are entirely different β see our UK poker tax guide. Canadian players who cash in U.S. tournaments face 30% withholding and can recover most of it under Article XXII paragraph 3 of the Canada-U.S. tax treaty; we cover the mechanics in the Canadian poker tax guide.
Disclaimer: This article provides general information about U.S. poker taxation as of 2026. It is not tax, legal, or financial advice. Tax rules vary by personal circumstances and change over time. PokerCharts is not a tax advisor and disclaims liability for any decisions made based on this content. Consult a qualified U.S. tax professional for guidance specific to your situation.