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President Donald Trump’s summer tax package is facing a fresh backlash from America’s horse racing industry, as the National Thoroughbred Racing Association (NTRA) steps up lobbying to reverse a new limit on gambling loss deductions that it says will drain more than $1bn out of pari-mutuel handle.
Speaking at the Global Symposium on Racing in Tucson on 10 December, NTRA president and chief executive Tom Rooney said the group’s “number one priority” in Washington is passage of the WAGER Act – a bill that would restore the right of horseplayers to offset 100% of their wagering losses against their winnings for federal tax purposes.
“We are told it will be retroactive,” Rooney told delegates, adding that industry allies on Capitol Hill want any fix to apply to the 2025 tax year even if corrective legislation only clears Congress in early 2026.
What changed under the “One Big Beautiful Bill”?
The controversy stems from the One Big Beautiful Bill Act (OBBBA), the wide-ranging tax and spending law Trump signed on 4 July. Among provisions cutting federal tax on overtime pay and service tips, the final Senate version quietly amended long-standing rules on gambling losses.
From the 2026 tax year onward, individual filers will be able to deduct only 90% of their gambling losses against reported winnings. In practice, that means a bettor who finishes the year with US$10,000 in gross winnings and US$10,000 in losses would still have to declare US$1,000 in taxable income – despite having broken even in cash terms.
Racing groups describe that 10% “haircut” as a tax on “phantom income” that will alter betting behaviour, shrink pools, and reduce purses across the country.
“While there were many victories for our sport in the legislation passed this summer, we noted at the time that work needed to be done to repeal the language that would effectively tax horse players on phantom income,” Rooney said in an earlier NTRA statement backing the WAGER Act. “This provision will have a negative impact on our customers who fuel a US$36 billion industry responsible for nearly half a million jobs, thousands of small agribusinesses, and millions of acres of open working space.”
WAGER Act: racing pushes its fix
In response, Kentucky congressman Andy Barr, a Republican who chairs the Congressional Horse Caucus, has introduced the Winnings and Gains Expense Restoration (WAGER) Act. The bill would remove the 90% cap and revert to the previous system, under which documented losses can fully offset gambling winnings on Form 1040.
“Restoring full deductibility of wagering losses will help the thoroughbred horse racing industry maximise economic value for equine businesses,” Barr said when he filed the bill, arguing that the OBBBA provision would hit not only serious horseplayers but also racetracks and breeding operations that depend on robust betting volumes.
Barr’s initiative has drawn backing from major Kentucky racing stakeholders, including Keeneland, Churchill Downs, the Breeders’ Cup, and The Jockey Club, as well as national and state-level horsemen’s groups. Estimates circulated by NTRA and its allies suggest the 10% cap could reduce pari-mutuel handle by 5–8%, translating into more than US$1bn in lost turnover over time.
Shannon Arvin, chief executive of Keeneland, said in support of the bill that “ensuring horseplayers can fully deduct losses is essential to maintaining a healthy wagering ecosystem that drives purses, supports breeders and sustains the broader racing economy.”
Industry warns of wider ripple effects
In Tucson, Rooney notes the issue less as a niche concern for high-volume bettors and more as a structural threat to an already pressured sport.
“The problem with that is the people that bet on horses, the billion dollars that you think that you’re saving, those bettors might just go elsewhere, and instead of getting the 90%, you’re going to get nothing,” he said, arguing that sophisticated gamblers can shift their play into sports betting, online casinos or even overseas pools if the tax code becomes too punitive.
Taking US$1bn out of the handle equation, Rooney said, affects “the whole ecosystem of the racetrack – the people that work at the racetrack, the people that work on the backside, on the farms. Everybody is affected by this. And if you think that you’re going to be making up a billion dollars from that tax, you’re probably not. You’re probably going to lose everything.”
The NTRA estimates that racing and breeding together support roughly 500,000 jobs across the United States when indirect employment is included, from grooms and exercise riders to feed suppliers, veterinarians, and transport companies.
Retroactivity and timing
One key question for horseplayers is timing: the 90% cap is due to start applying to the 2026 tax year, meaning returns filed in spring 2027. Industry groups are lobbying for any fix to include the 2025 tax year – effectively ensuring there is no gap in 100% deductibility.
Rooney told attendees in Tucson that NTRA has been “walking the halls of Congress” in recent weeks to secure that outcome, saying “we are told it will be retroactive” if the WAGER Act or similar language is folded into an early-2026 bill.
Tax specialists note that Congress has a history of passing retroactive relief measures, particularly when technical adjustments are made to complex tax packages. But they also caution that such provisions can be politically sensitive, especially in a presidential election year when opponents may frame them as niche carve-outs for gamblers.
Can Congress move quickly enough with the next steps?
For now, the NTRA is urging horseplayers and industry workers to contact their representatives in support of the WAGER Act and related Senate efforts. Rooney said the association would “keep working it” until a legislative vehicle emerged, positioning the reversal as a matter of basic fairness rather than a special-interest plea.
“Ensuring that our customers are not taxed on money they never actually keep is not a loophole – it is common sense,” he said.
Whether Congress moves quickly enough to provide that reassurance before the new rules bite remains an open question. But with billions in annual handle and thousands of livelihoods at stake, racing’s tax fight looks set to be one of the sector’s defining policy battles heading into 2026.
Source: ThoroughBred Daily News (TDN)
