Congress Votes on Gambling 'Phantom Income' Tax Fix and Crypto Tax Overhaul

A bipartisan bill aims to fix a widely-criticized tax issue in how gambling losses are treated, which has been dubbed 'phantom income' by tax professionals.

The problem arises from a provision in last year's federal tax legislation that cut the gambling loss deduction from 100% to 90%, starting January 1, 2026.

This means if someone wins $100,000 and loses $100,000 in a single year, they can only deduct $90,000, resulting in being taxed as if they'd earned $10,000 in income. Reps. Steven Horsford (D-Nev.) and Max Miller (R-Ohio) introduced the FULL HOUSE Act to address this issue.

The bill has a structural advantage with both Horsford and Miller sitting on the House Ways and Means Committee, which will be marking up the bill on September 16. The companion Senate bill from Catherine Cortez Masto (D-Nev.) and Ted Cruz (R-Texas) was introduced as well.

In addition to the gambling tax bill, a separate crypto tax package is also being brought to markup on the same day. This includes H.R. 9175, the Mining and Staking Tax Clarity Act, which would allow miners and stakers to defer paying taxes until they sell their tokens, rather than being taxed immediately.