The sweeping One Big Beautiful Bill (OBBB) signed into law this year altered two key components of the gambling-related tax code.
- The IRS confirmed the slot-win reporting threshold will rise from $1,200 to $2,000 in 2026, easing compliance burdens for casinos and players.
- The same tax law reduced gambling loss deductions from 100% to 90%, creating taxable “phantom income” for high-volume gamblers.
- Despite bipartisan support, legislation to restore full loss deductions has stalled with the change set to take effect Jan. 1.
After months of confusion, the IRS effectively confirmed this week that the bill increased the slot win reporting threshold mandate from $1,200 to $2,000. This increase, at least partially, fulfilled a long-term gaming industry goal.
The OBBB also reduced the 100% deduction of gambling losses against wins to 90%, a move that has alarmed big-time gamblers and casinos. Despite months of legislative efforts, and bipartisan support, lawmakers have not enacted a restoration.
Slot threshold increased verified
Many casino operators were uncertain of the slot increase until the IRS released a draft memo of its 2026 tax code changes this month, all but confirming the provision from the OBBB would take effect next year.
Current law requires all casino operators to shut down slot machines if a player wins a prize exceeding $1,200. An employee must give the player a tax form before play can resume, creating an extra burden for the casino - and preventing a customer from playing more.
The limit has not been updated since 1977.
Industry stakeholders and advocacy groups including the American Gaming Association had lobbied for decades to increase the limit to keep up with inflation. As of this year, the industry’s sought-after limit was closer to $5,000, which would be more in line with the pre-inflation income level Congress enacted when it approved the threshold nearly 50 years ago.
At the time, casino gaming had only been legalized in Nevada and New Jersey. There are now roughly 1,000 commercial and tribal casinos spread across 43 states.
“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,” American Gaming Association CEO Bill Miller wrote in a July letter to a member of Congress touting the provision in the OBB.
Tax deduction remains concern
That same tax bill, many gamblers fear, could also have far more detrimental consequences.
Gamblers who itemized deductions could deduct all of their gambling losses against their wins as of tax year 2025. This means that for this year, a gambler who won $100,000 and lost $100,000 gambling would not have to pay taxes on their winnings.
As of 2026, that same gambler would have to pay taxes on $10,000 of winnings they didn’t actually realize.
This has far-reaching implications for sports bettors, poker players, and gamblers who win and lose millions annually. Though they represent a small fraction of overall taxpayers, these large-scale gamblers provide liquidity - and much of the revenue - for casinos and sportsbooks nationwide. Stakeholders fear the tax code could lead these players to stop gambling, denying significant revenue potential.
The larger worry is that this could lead to further deleterious trickle-down impacts on the millions of smaller gamblers who could now face worse odds or reduced gambling opportunities as casinos change their games or close.
“The result creates an unfair precedent by taxing phantom income and uniquely penalizing a legal, heavily regulated activity,” Miller wrote in his address to Congress.
A growing bipartisan group of Congressional lawmakers have backed a two-line bill authored by Nevada Rep. Dina Titus to restore the 100% deduction. Members of Congress have decried the unethical nature of a phantom tax on unrealized earnings.
Thank you @RepAndyBarr for co-sponsoring the FAIR BET Act. With bipartisan support, we are one step closer to restoring the 100% tax deduction for gambling losses. It’s the right thing to do.
— Dina Titus (@repdinatitus) December 17, 2025
This hasn’t led to comparable action.
Despite the growing support, and the public backing of powerful House Ways and Means Chair Jason Smith, the bill has still not received the first of several votes needed to pass. The bill now has less than two weeks to be incorporated into another bill or pass on its own.
Supporters remain publicly optimistic the bill can still come into law before it's set to take effect Jan. 1. But as the gaming industry celebrates the confirmation of the slot tax threshold increase, a far more consequential impact could come to pass.
