Tax Trivia:
Under recent federal changes, Californians who lose big this month on March Madness wagers will be able to deduct what percentage of their losses on their federal and state returns for the 2026 tax year, down from 100 percent for the 2025 and prior tax years?
Answer:
The deduction is capped at 90 percent of losses. Casino.org notes that under the new law: “Even if you break even on losses and winnings, you still pay tax. So, if you win $20,000 and lose $20,000 during the tournament, you can only deduct $18,000. The IRS looks at that $2,000 as taxable income even though the bettor broke even and made zero profit. You’d have to be a net loser to actually owe $0.”