You've probably read about the new US tax rule on gambling (yes, poker is gambling) that states only 90% of gambling losses may be deducted on your taxes. I've been thinking about the implications, and there are clear winners and losers in the poker world.
The overriding principle: variance is your worst enemy. This has always been true for winning poker players, but it's even more applicable now. Let me give you a quick example.
Your total buy-ins for 2026 are $300k, which is astonishingly easy to reach. You cash out for a total of $310k and thus have a $10k profit. Here's how the 2026 math works:
- $310k – (90% x $300k) = $310k – $270k = $40k.
You pay tax on $40k, despite having won $10k. It's quite possible the tax will be greater than your actual profits.
Now, suppose you have a bigger, swingier year and buy in for $600k instead. You still manage to win $10k, cashing out for a total of $610k. The math goes as follows:
- $610k – (90% x $600k) = $610k – $540k = $70k.
So you pay tax on $70k of that $10k profit, certainly obliterating the profit and putting you well into the red.
Given that variance is particularly bad, there are now better and worse ways to get your poker fix if you live in the US.
The winners and losers list
- Winner: Cash games. It's not uncommon to hear a cash player say, "I've had six straight winning sessions." When was the last time you heard a tournament denizen say, "I cashed six straight tournaments?" In a tax regime that rewards a session win and penalizes a session loss, cash is, indeed, king.
- Winner: Limit/mixed games. A lot of people pooh-pooh limit games because you can't grit your teeth, glare at your opponent, and say "All-in!" I assure you that limit poker can be fun, interesting, and profitable. Especially now that people are playing some very interesting games, such as 2-7 Triple Draw.
- Winner: Split pot games. Games in which you can rescue half a pot radically reduce your variance. In fact, the best split pot players routinely freeroll their less accomplished opponents. Being on a freeroll is a great cure for variance.
- Winner: Running it twice. We've told you over and over again that running it twice doesn't change the expected outcome – it just reduces variance. Well looky here. If your room permits running it twice without doubling the rake, do so. I'm not sure that the variance reduction justifies paying double rake – I kinda doubt it.
- Loser: Tournaments. Let's say that, on average, tournaments pay 15% of the field. Then 85% of the field has a losing day (aka 'losing session'). So day after day, session after session, tournament players lose money. Then they bink a big one. But they will be handed a W2G for the entire win and have to claim that against 90% of the losses that have piled up. This is why I wondered if the new law would effectively kill off the mid-stakes tournament pro.
- Loser: PLO. Everybody knows that PLO is a variance-fest – even the PLO pros acknowledge that their game has absurd swings. It's quite possible that the hold'em aficionado would be the person with $10k profit on $300k in buy-ins, while their PLO counterpart would be the one with $10k profit on $600k in buy-ins.
- Loser: Carnival games. Does your regular no-limit hold'em game include bomb pots, stand-up/nit, squid, bounty, seven-deuce, or any other high-variance side game? Each of those games has the feature of collecting a bunch of money from each player, then distributing it all to one person, almost in a lottery. In the case of the stand-up game, it's the other way around. In both cases, the side games are massive variance generators and will definitely add to the bottom-line variance you experience.
- Loser: Volume. Cash game mavens are fond of saying, "Volume cures variance." In the pure EV sense, that's inarguable – if you are a winning player, the longer you play, the closer your actual hourly results will converge on your expected win rate. However, the more volume you put in, the greater both your buy-in and cash-out totals. As they grow, so does the 10% 'losing session penalty' that you pay to the IRS. If this all sounds completely insane to you, you're correct.
When the piper will be paid
When Russ Fox was recently interviewed on the Thinking Poker Podcast, he said that he thought everybody would start noticing all this stuff next year, when people are preparing their 2026 taxes. The tournament grinders will have W2Gs coming through the mail slot as they're pawing through their backpack looking for buy-in slips. That's when the pain will really hit.
I don't know how much we'll see the poker landscape change because of the new '90%' tax law. Of course it's possible (not to say 'probable') that the 90% rule will be retroactively revoked before the end of the year. But unless that happens, at one point or another, expect to see some adaptation to the new rules in the poker marketplace. We’ll just have to see how big the impact is on the poker landscape.
