Rep. Barr Introduces WAGER Act to Restore Full Gambling Loss Deductions

A Targeted Strike at the “Phantom Income” Tax

The Winnings and Gains Expense Restoration (WAGER) Act of 2025 directly targets a change in the tax code that limits gambling loss deductions to 90% of winnings. This new rule, set to take effect on January 1, 2026, would force a bettor who breaks even for the year to pay taxes on 10% of their losses.

Barr’s bill seeks to eliminate the language that caps the deduction, a change that has drawn widespread condemnation from the gambling and horse racing industries.

They argue that taxing this “phantom income” will drive players to unregulated offshore markets and cause “irreparable harm” to the legal betting ecosystem.

As the chairman of the Congressional Horse Caucus, Rep. Barr is a key voice for the horse racing industry. His bill is specifically designed to support the economic health of the sport, which relies heavily on a robust and fair wagering environment.

“Restoring the full deductibility of wagering losses is critical to preserving a healthy betting ecosystem that drives purses, supports breeders, and sustains the broader racing economy,” said Drew Fleming, President and CEO of Breeders’ Cup Limited. Tom Rooney, President and CEO of the National Thoroughbred Racing Association (NTRA), praised Barr for introducing the bill, stating the tax change is “harmful to bettors” and “must be fixed.”

A Chorus of Bipartisan Support

The WAGER Act is the third piece of legislation introduced in Congress to address this issue, signaling a growing bipartisan consensus for a repeal. Rep. Dina Titus (D-NV) introduced the FAIR Bet Act, the primary legislative vehicle for the fix, which has garnered 10 bipartisan co-sponsors. In the Senate, Catherine Cortez Masto (D-NV) has introduced a companion bill.

The push for repeal gained significant momentum at a recent House Ways and Means Committee field hearing in Las Vegas. Committee Chairman Jason Smith (R-MO) called the 90% cap a “bad decision” and stated that lawmakers on “both sides of the aisle are open to working to address it.”

With the January 1, 2026, deadline approaching, lawmakers are in a race against time to pass a legislative fix. The WAGER Act, like the FAIR Bet Act, has been referred to the powerful House Ways and Means Committee, where it will need to pass before it can get a vote in the full House.

The unified front from both parties, combined with strong industry support, provides the best hope yet that the controversial tax provision will be repealed.