The IRS has confirmed that the reporting threshold for slot machine jackpots in land-based casinos will nearly double in 2026, a change nearly 50 years in the making. The One Big Beautiful Bill Act (OBBBA) raised the minimum amount triggering a W-2G form from $1,200 to $2,000.
“For calendar years after 2025, the minimum threshold amount for reporting certain payments and backup withholding on certain information returns, including the Form W-2G, will be adjusted yearly for inflation,” the IRS stated in guidance for filing W-2G forms. “The minimum threshold amount for payments made in calendar year 2026 is $2,000.”
While the new threshold eases administrative burdens, state regulators must update rules to align with the IRS change. Casinos may face delays implementing the new numbers at the start of the year. Winnings below the $2,000 threshold remain taxable, and W-2G forms for prizes won under the previous limit will still apply. The adjustment is expected to improve the experience for both players and casino staff, who previously had to halt machines for lengthy reporting procedures.
Loss Deduction Cap Set to Start
A second tax provision will take effect Jan. 1, limiting gamblers to deduct only 90% of losses against winnings. Previously, gamblers could deduct 100% of losses, a measure that mitigated taxes on high-volume players. The reduction creates taxable “phantom income” for those who win and lose large sums over the year.
“The result creates an unfair precedent by taxing phantom income and uniquely penalizing a legal, heavily regulated activity,” said Bill Miller, AGA President and CEO. Despite bipartisan support, efforts to restore full deductions have stalled, leaving professional gamblers and casinos concerned about the new tax burden and its potential impact on overall gaming revenue streams.
Historical Context and Industry Response
The slot reporting threshold had remained at $1,200 since 1977. Adjusted for inflation, that figure is nearly $6,400 in 2025 dollars. The American Gaming Association (AGA) had advocated for a higher limit, suggesting a $5,000 threshold to reduce regulatory burdens and improve customer experience.
“The new reporting threshold of $2,000 for slot winnings will mean less compliance burdens for our patrons and operators, while also eliminating unnecessary paperwork for the IRS,” Miller wrote in a July letter supporting the OBBBA provision. Nevada Rep. Dina Titus and other lawmakers also endorsed raising the threshold, though the final figure fell short of the $5,000 target.
Industry stakeholders warn that the deduction cap could affect revenue, particularly among high-stakes gamblers, including sports bettors and poker players. These individuals account for significant liquidity at casinos and sportsbooks. Some worry smaller players could face diminished opportunities if casinos adjust games or close machines in response. The change also highlights the tension between modern gambling operations and tax laws that have not fully evolved to reflect today’s high-volume gaming environment.
Despite the confirmed slot threshold increase, the looming loss-deduction change is expected to have far-reaching consequences for the gaming community, with advocates urging Congress to act before Jan. 1. The industry will be watching closely as the new rules take effect, weighing both compliance and economic impacts.
Source:
“Slot jackpot tax increase will go into effect in time for 2026 taxes”, sbcamericas.com, December 17, 2025
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