IRS Raises Slot Jackpot Tax Reporting Threshold to $2,000 Ahead of 2026

The Internal Revenue Service (IRS) is increasing the federal tax reporting threshold for slot machine winnings from $1,200 to $2,000, effective January 1, 2026. The update applies to Form W-2G, which casinos issue for reportable gambling winnings.

The $1,200 reporting threshold had been in place since 1977, despite decades of inflation significantly eroding its real-world value.

Under the revised IRS guidance, the new $2,000 minimum will also be indexed annually for inflation. That ensures the threshold adjusts automatically in future years rather than remaining static for decades.

The change will likely reduce the number of handpay events on casino floors — a long-standing friction point for both operators and players. At the same time, the annual inflation index is a change that many in the industry have argued is long overdue.

What is a Handpay & What Triggers One?

A handpay occurs when a slot win reaches a reporting threshold, requiring manual processing by casino staff. When triggered, the slot machine locks, pausing the play. An attendant must verify the win, process the payout, and issue Form W-2G to the player.

Under the updated rules taking effect in 2026, slot machine wins of $2,000 or more will trigger a handpay and W-2G issuance. Previously, that reporting threshold was $1,200

Handpays are more than an administrative formality. They temporarily take machines offline, require staff resources, and interrupt gameplay. Raising the threshold, even slightly, could reduce floor disruptions, particularly for mid-range jackpots that are increasingly common on modern slot machines.

IRS Clarifies Application of New Threshold

In its draft 2026 Instructions for Forms W-2G and 5754, the IRS further explains how it will apply the updated reporting framework across different types of gambling.

The IRS also notes that applicable reporting thresholds vary by the type of gambling winnings. Game-specific rules determine when a W-2G is required.

Separately, the guidance reiterates that casinos may use an optional aggregate reporting method for bingo, keno, and slot machines. That will allow a payer to report more than one payment of reportable gambling winnings received by a payee in a 24-hour calendar day or “gaming day” on a single information return.

The draft instructions do not change withholding mechanics for slots. The IRS states that regular gambling withholding doesn’t apply to winnings from bingo, keno, or slot machines.

Still, backup withholding at 24% may apply if the winner does not furnish a correct taxpayer identification number (TIN) and the winnings meet or exceed the applicable reporting threshold.

Table Games vs. Slots: How Reporting Rules Differ

Federal tax reporting rules vary depending on the type of game and how winnings are calculated.

• Slot machines are subject to a flat dollar reporting threshold, now $2,000 beginning in 2026.
• Table games, such as blackjack, roulette, and baccarat, do not use a flat dollar threshold. Instead, the winnings must exceed 300 times the amount wagered and meet the applicable reporting threshold. This combination makes W-2G reporting relatively rare for most table-game play.
• Poker tournaments follow separate rules. A W-2G is issued when a player’s net tournament winnings — winnings minus the buy-in — exceed $5,000. Cash-game poker winnings are not subject to W-2G reporting.

For online casinos, there’s another distinction:

• IRS treats live dealer table games as table games. They follow the same 300x wager test.
• The agency treats RNG-based table games (such as digital blackjack or roulette) as slot machines for tax reporting purposes. That means the slot reporting threshold applies.

Another Gambling Tax Change Coming in 2026: Loss Deductibility

While the reporting threshold increase is a slight relief for players, it arrives alongside another significant gambling-related tax change scheduled to take effect in 2026.

Under current law, gamblers can deduct 100% of their gambling losses, up to the amount of their winnings. Beginning in tax year 2026, that deduction will be 90% of documented losses, even when losses fully offset reported winnings.

In practical terms, a player with $100,000 in gambling winnings and $100,000 in losses would previously report no net taxable gambling income. Under the new rule, only $90,000 of losses would be deductible, resulting in $10,000 of taxable income, despite no net profit.

The gaming industry and tax professionals have criticized the change. After its passage, multiple Senators have come forward to say they were not aware of its inclusion in the One Big Beautiful Bill.

Lawmakers from gaming states, including Nevada Rep. Dina Titus, have introduced legislation aimed at reversing the change and restoring full loss deductibility. They argue the rule effectively taxes “phantom income” and could push players toward unregulated markets.

There are three active bills in Congress, including Titus’s to reverse the change. While they have not seen action, there is bipartisan support for reversing the change. That gives hope to many gamblers and stakeholders that lawmakers will restore the 100% deduction before the 2027 tax filing.