The Internal Revenue Service has formally confirmed that casinos will begin reporting certain gambling winnings only once they reach $2,000, marking a significant update to long-standing federal tax rules. The adjustment, which takes effect on January 1, 2026, follows months of confusion after Congress passed the One Big Beautiful Bill Act of 2025, legislation that appeared to raise the reporting limit but left unanswered questions about timing and enforcement.

The clarification arrived through a draft IRS tax form published online, providing the first explicit confirmation that casinos and players have been seeking. Under the prior rules, casinos were required to issue a Form W-2G for slot machine jackpots of $1,200 or more, a threshold that had remained unchanged since 1977 despite decades of inflation and growth in wager sizes across both commercial and tribal gaming operations.

IRS Draft Guidance Ends Industry Uncertainty

The newly released draft specifies that, beginning with the 2026 tax year, certain payments subject to information reporting and backup withholding, including those reported on Form W-2G, will only be reportable once they reach a $2,000 minimum. The draft also establishes that the reporting threshold will increase annually to reflect inflation, introducing an automatic adjustment mechanism that had not existed before.

While the change still requires approval from the Office of Management and Budget, that step is widely viewed as procedural. Industry observers expect the approval to move forward without substantive revisions. Reaction from parts of the casino community reflected relief after a prolonged wait.

Casino operators have already begun preparing for the shift, reviewing compliance systems and staff training ahead of the effective date. Many venues now face the practical challenge of updating slot machine software and operational procedures, a process expected to take time. As a result, some machines may continue to lock up at the old $1,200 level even after the new year, though no W-2G would be issued in those cases, according to Next.io.

Effects on Casino Operations and Players

For operators, the higher threshold reduces the volume of low-value jackpot reporting and eases administrative burdens that had grown disproportionate over time. For players, the change means fewer interruptions during play and less frequent tax paperwork for modest wins. The update represents the first meaningful revision to jackpot reporting rules in nearly five decades.

The shift may also affect casino staffing patterns. Fewer reportable handpays could reduce demand for slot attendants, potentially leading to changes in staffing levels or job responsibilities. Commentators have also noted that fewer handpays could reduce tipping opportunities for attendants, especially as “fast pay” systems already allow some players to bypass traditional handpay processes.

Broader Gambling Tax Debate Continues

The confirmed reporting change arrives alongside broader debate over federal taxation of gambling winnings. Under the same 2025 law, gamblers who itemize deductions will be limited to deducting 90% of their gambling losses against winnings starting in 2026, rather than 100% as allowed previously. Industry groups and lawmakers have warned that the rule could create “phantom income,” forcing taxpayers to owe federal tax despite breaking even over the year.

President Donald Trump has publicly suggested he may reconsider how gambling winnings are taxed. When asked in early December about eliminating federal taxes on gambling winnings, he responded, “No tax on gambling winnings, I don’t know. I’m gonna have to think about that.” His remarks followed earlier comments tying the idea to a broader review of income tax policy that has already included changes affecting tips, Social Security benefits, and overtime pay.

The gaming industry has pushed back strongly against the new loss-deduction cap. American Gaming Association representatives have described the provision as “uniquely penalizing” compared with other forms of income. DraftKings CEO Jason Robbins echoed that concern, saying, “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.”

Several lawmakers from both parties have acknowledged the controversy. Rep. Jason Smith of Missouri, chairman of the House Ways and Means Committee, labeled the provision a “mistake,” while Rep. Dina Titus of Nevada has sponsored legislation to restore the full deduction of gambling losses. None of the repeal efforts have advanced to a vote so far.

For now, the IRS confirmation of the $2,000 reporting threshold stands as a concrete regulatory update, closing a long period of uncertainty that followed passage of the 2025 tax law. While debates over gambling taxation continue, casinos and players at least have clarity on how jackpot reporting will work when 2026 begins.