A new law coming into effect from the start of next year will see the tax reporting threshold of big slot wins increased to $2,000, a result of the successful passage of the Big Beautiful Bill. The measure will require operators to issue a form W-2G when a slot jackpot comes in at $2,000 or more. Previously, the limit was $1,200.
Raising the threshold means fewer routine wins will trigger a handpay stoppage and additional tax paperwork, allowing players to continue without disruption. The previous $1,200 reporting limit had been in place since 1977 and was widely regarded as outdated in the context of inflation and the size of modern slot payouts.
On updated guidance, the IRS stated: “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.”
Mixed reaction on increase in threshold
Chris Cylke, Senior Vice President of Government Relations at the American Gaming Association (AGA) said the increase had been a long time coming when the Big Beautiful Bill was released earlier in the summer.
At the time, he said: “Raising the slot tax reporting threshold to $2,000 and indexing it to inflation is a long-overdue modernisation that reduces regulatory burdens and improves the customer experience. It’s a hard-fought win for our industry, and we look forward to working on regulatory implementation.”
The $2,000 doesn’t quite meet the $5,000 threshold the AGA was calling for. At the time, Nevada Congresswoman Dina Titus, a strong advocate for the AGA proposal, said that while it was a “step in the right direction”, she wanted to see it higher.
“The IRS Advisory Council recommended that this threshold be raised to over $5,000 and indexed to inflation. The current threshold has not been updated since 1977,” she said.
“I will continue to advocate for the SLOT Act, which adjusts the jackpot threshold accordingly to keep up with inflation and improve the gaming experience for the customer and operator.”
Tax on gambling winnings criticised by industry insiders
While the Big Beautiful Bill has taken positive steps to reduce the tax burden on lucky patrons, there remains a demand from the sector to completely rework the current approach to taxing winnings, which many label unfair and “uniquely penalizing.”
Under the same 2025 law, a separate provision will take effect in 2026 that limits how much of their gambling losses players can deduct against winnings if they itemize on their tax returns. Previously, gamblers were allowed to deduct 100% of their losses, up to the amount of their winnings. Under the new rule, that deduction will be capped at 90%.
In practical terms, this means a player who wins and loses roughly the same amount over the course of a year could still end up owing federal tax on money they did not actually keep. For example, a gambler who records $100,000 in winnings and $100,000 in losses would only be able to deduct $90,000 in losses, leaving $10,000 treated as taxable income. Industry groups argue this effectively taxes “phantom income”, referred to as paper profits that do not reflect a player’s real financial outcome.
Donald Trump has weighed in on the issue but was non-committal. “We have no tax on tips, we have no tax on Social Security, and we have no tax on overtime,” he said at the start of the month. “No tax on gambling winnings, I don’t know. I’m gonna have to think about that.”
DraftKings CEO Jason Robbins, a proponent of eliminating taxes on gambling winnings from the American public, said the idea of putting a levy on winnings as income should be a non-starter: “If you can’t deduct all your losses, you know, how does that make sense that you pay income tax on something that’s not actually income.”
Professional poker player Phil Galfond who has total live earnings of $2,976,763 and is ranked in the top 1,000 of the all time money list by HendonMob Poker Database, described his disgust at the new policy, taking to X to write: “Now, we would pay as if we won $5.2 million, minus 90 percent of $5 million, which is $4.5 million for a fake net of $700,000… So you would make $200,000 during the year and pay tax as if you made $700,000,”
Tax analysts note the change to limit gambling loss deductions “is designed to improve tax fairness by ensuring that high-volume gamblers with frequent offsetting losses still report a minimum taxable gain.”
It seems this is a battle the industry will have to return to over the coming months.
