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The Internal Revenue Service has finalized new rules that will completely change how gambling winnings are reported beginning with the 2026 tax year.
For the first time in nearly fifty years, the threshold for reporting slot machine jackpots has been raised, moving from $1,200 to $2,000. The change, introduced under the One Big Beautiful Bill Act (OBBBA) and now confirmed in updated IRS guidance, shows inflation indexing and is designed to ease reporting burdens for both casinos and players.
According to the IRS instructions released this month, the $2,000 minimum applies to slot machine winnings starting January 1, 2026.
“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,” it added.
Withholding rules remain in place
While the reporting threshold has been updated, withholding obligations remain unchanged. Winnings of $5,000 or more from sweepstakes wagering pools, lotteries, parimutuel betting, and sports wagering continue to face a 24% federal withholding rate.
Backup withholding at the same rate applies when winners fail to provide a valid taxpayer identification number. For noncash prizes, such as cars or trips, the fair market value determines whether withholding applies, with rates set at 24% or 31.58% depending on who covers the tax.
Winners subject to reporting must present two forms of ID, one of which includes a photo. Tribal casinos may waive the photo requirement for members presenting tribal identification cards.
Massive breather for US casinos
Casinos around the country have long argued that the outdated $1,200 slot limit created unnecessary paperwork and slowed down play. For decades, operators have been required to stop play and file a W‑2G tax form every time a slot jackpot reached $1,200 or more.
The process not only triggered paperwork but also forced machines offline for as long as 45 minutes. The threshold, set back in 1977, never changed, even with inflation. According to the Bureau of Labor Statistics, $1,200 in 1977 equals nearly $6,400 in 2025 dollars.
Industry leaders had long pressed for reform. The AGA repeatedly pushed to raise the reporting level for slots, keno, and other games to as much as $5,000.
The IRS’s decision to move the threshold to $2,000 starting in 2026 is being welcomed as a step forward. “It was a hard‑fought win” and a “long‑overdue modernization,” said AGA Senior Vice President of Government Relations Chris Cylke, according to SBC Americas.
“It’s not the $5,000 that we wanted,” acknowledged AGA President and CEO Bill Miller at the Global Gaming Expo in October. “But we are getting there and we take the win and we will continue to work to get to that $5,000 number.”
