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One Big Beautiful Bill Act: A Mixed Bag for Thoroughbred Racing and Horseplayers
- Updated: July 4, 2025
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On July 3, 2025, Congress passed President Donald Trump’s “One Big Beautiful Bill Act” (OBBBA), which was promptly signed into law. This sweeping legislation, an extension of the Tax Cuts and Jobs Act of 2017, brings significant changes to the tax landscape, with profound implications for the Thoroughbred horse racing industry and its betting community. While the act offers substantial benefits for horse owners and breeders, it introduces challenges for horseplayers that could reshape the industry’s economic dynamics. This article explores the dual impact of the OBBBA, the concerns of stakeholders, and potential strategies to mitigate the losses faced by horseplayers.
A Win for Horse Owners and Breeders
The OBBBA makes permanent the 100% bonus depreciation provision, a critical incentive for Thoroughbred breeders and owners. Originally part of the 2017 Tax Cuts and Jobs Act, this provision was set to phase out, dropping to 40% in 2025, 20% in 2026, and 0% by 2027. By locking in 100% bonus depreciation retroactive to January 20, 2025, the act allows horse owners to immediately deduct the full cost of capital investments, such as purchasing breeding stock or upgrading facilities. This financial boost is expected to encourage investment in the industry, supporting its economic vitality.
The National Thoroughbred Racing Association (NTRA) has hailed this development, crediting key lawmakers like Representative Andy Barr (R-KY), Senate Majority Leader John Thune (R-SD), and former Senate Majority Leader Mitch McConnell (R-KY) for ensuring the industry’s interests were represented. The NTRA emphasized that the removal of problematic language regarding excess business loss carryovers further protects the financial gains from this provision, preventing potential setbacks for horse owners. “By making bonus depreciation permanent and protecting small-business loss carryovers, OBBBA delivers a targeted but critical boost for our signature horse industry,” said Representative Barr.
This provision is particularly significant for an industry where high capital expenditures are common. For example, purchasing a promising yearling or constructing state-of-the-art training facilities involves substantial upfront costs. The ability to deduct these expenses immediately reduces tax burdens, freeing up capital for further investment and fostering growth in Thoroughbred breeding and racing.
A Blow to Horseplayers
However, the OBBBA’s benefits for horse owners are overshadowed by a controversial tax provision affecting horseplayers. The act amends Internal Revenue Code Section 165(d), limiting gamblers’ ability to deduct wagering losses to 90% of their annual losses, effective from 2026. Under current law, gamblers can deduct 100% of their losses up to the amount of their winnings, ensuring they are taxed only on net profits. The new provision means that even if a gambler breaks even—say, winning $100,000 and losing $100,000—they will be taxed as if they earned $10,000 in profit. This effective 10% tax on gross winnings has sparked outrage among horseplayers, particularly professional bettors who rely on slim margins to sustain their livelihoods.
Professional poker player Phil Galfond, a vocal critic, warned on X that the provision could “end professional gambling in the U.S.” and have ripple effects on industries like horse racing that depend on high-volume bettors. Similarly, professional gambler Captain Jack Andrews described the change as potentially “imploding the entire gaming industry,” highlighting its threat to the betting ecosystem. The NTRA, led by President and CEO Tom Rooney, echoed these concerns, noting that horse racing’s revenue is heavily tied to wagering. “Our sport is generated by the people that play the horses,” Rooney told Thoroughbred Daily News. “If they’re dissuaded in any way to do that, it’s going to hurt our sport.”
The tax change could disproportionately affect professional horseplayers, who often cycle millions through betting pools to achieve modest net gains. For instance, a professional bettor with $3 million in winnings and $2.8 million in losses would currently pay taxes on a $200,000 profit. Under the OBBBA, they could only deduct 90% of their losses ($2.52 million), resulting in a taxable income of $480,000—a 140% increase in their tax liability. Such financial pressures could render professional gambling unsustainable, potentially driving bettors to unregulated offshore betting sites, which offer tax-free wagering but lack the oversight and economic contributions of domestic markets.
Ripple Effects on the Horse Racing Industry
The Thoroughbred racing industry relies heavily on betting handle—the total amount wagered on races—to fund purses, track operations, and other expenses. Professional horseplayers, though a small percentage of bettors, contribute significantly to this handle due to their high-volume wagering. Their potential exit from the regulated U.S. market could lead to a cascade of negative outcomes:
- Reduced Betting Volume: A decline in professional betting would shrink the handle, reducing revenue for tracks and diminishing prize pools, which could deter owners from entering horses in races.
- Impact on Jurisdictions: States with racetracks that lack supplemental revenue sources, such as casino subsidies, are particularly vulnerable. Rooney highlighted that these jurisdictions could face significant financial strain if betting activity decreases.
- Shift to Offshore Markets: Professional gamblers may turn to unregulated offshore platforms, which do not contribute to state taxes, local economies, or responsible gambling initiatives. This shift could undermine the regulated betting market, particularly in hubs like Las Vegas and Reno, as noted by Representative Dina Titus (D-NV).
- Economic Consequences: The American Gaming Association estimates that the gambling industry generated nearly $115 billion in revenue in 2024, supporting thousands of jobs and state tax revenues. A reduction in regulated betting could jeopardize these economic benefits.
Strategies to Offset Horseplayer Losses
The NTRA has pledged to work on solutions to mitigate the impact of the 90% deduction cap, aiming to keep professional and recreational horseplayers engaged in the regulated market. Several strategies could help offset these losses and maintain the industry’s betting ecosystem:
- Advocacy for Legislative Fixes:
The NTRA, in collaboration with the American Gaming Association and other gaming entities, is lobbying lawmakers to restore the 100% loss deduction. Rooney noted that previous lobbying efforts successfully removed detrimental tax provisions from earlier versions of the OBBBA, suggesting that continued advocacy could yield results. Representative Titus has also expressed willingness to introduce standalone legislation to address this issue, emphasizing the need to protect honest taxpayers and the gaming industry. - Enhanced Record-Keeping Support:
Professional horseplayers can mitigate some tax burdens by maintaining meticulous gambling logs. Detailed session logs can clarify net winnings within specific betting sessions, potentially reducing taxable income. The NTRA could develop educational programs or partner with betting platforms to provide tools for accurate record-keeping, helping horseplayers navigate the new tax landscape. - Incentivizing Domestic Betting:
To discourage horseplayers from moving to offshore accounts, tracks and betting operators could offer incentives such as enhanced loyalty programs, reduced takeout rates, or rebates for high-volume bettors. These measures could help offset the tax burden and make regulated betting more attractive. For example, lowering the takeout—the percentage of the betting pool retained by the track—could increase net returns for bettors. - Expanding Revenue Streams:
The industry could diversify its revenue sources to reduce reliance on betting handle. This might include increasing sponsorships, expanding media rights deals, or developing new entertainment offerings at racetracks, such as concerts or family-friendly events. These efforts could stabilize finances, mitigating the impact of reduced wagering. - Engaging Recreational Bettors:
While professional horseplayers are critical, recreational bettors form the majority of the betting pool. The NTRA could invest in marketing campaigns to attract and retain casual bettors, emphasizing the excitement and accessibility of horse racing. Simplified betting platforms and educational initiatives could encourage broader participation, offsetting declines in professional wagering. - Exploring Alternative Tax Structures:
The NTRA could advocate for alternative tax frameworks, such as taxing only net gambling profits or allowing professional gamblers to deduct additional business expenses (e.g., handicapping tools or travel costs) outside the 90% cap. Such changes would require significant legislative effort but could preserve the viability of professional gambling.
The Path Forward
The One Big Beautiful Bill Act presents a complex scenario for the Thoroughbred horse racing industry. The permanent 100% bonus depreciation is a clear victory for horse owners and breeders, promising increased investment and economic stability. However, the 90% loss deduction cap threatens the financial sustainability of horseplayers, particularly professionals, and could disrupt the industry’s betting-driven revenue model. The NTRA’s commitment to addressing these challenges is a positive step, but success will depend on effective advocacy, innovative industry strategies, and collaboration with lawmakers and gaming stakeholders.
As the bill’s provisions take effect in 2026, horseplayers and industry leaders must act swiftly to adapt. By combining legislative advocacy with practical solutions like enhanced record-keeping and bettor incentives, the Thoroughbred racing industry can work to preserve its economic foundation while continuing to thrive as a cultural and sporting institution. The stakes are high, but with strategic action, the industry can navigate this new tax landscape and ensure that both horse owners and horseplayers remain integral to its future.
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