12/16/2025
Starting on January 1, 2026, two key changes regarding U.S. casino winnings will take effect as part of the One Big Beautiful Bill Act (OBBBA):
The IRS reporting threshold for slot machine and keno winnings will increase. The deduction limit for gambling losses will be capped at 90% of winnings, meaning there will no longer be a full exemption on net income if losses equal or exceed winnings.
Increased Reporting Thresholds The amount at which a casino is reauired to issue a Form W-2G to a winner and the IRS will increase for certain qames:
Slot Machines: The threshold for mandatory W-2G reporting increases from $1,200 to $2,000.
Keno: The threshold increases from $1,500 to $2,000.
This change aims to reduce paperwork for casinos and players and the new $2,000 limit for these specific games will be adjusted annually for inflation starting in 2027. The reporting thresholds for other forms of gambling (e.g., poker tournaments, horse races) remain unchanged New Limit on Loss DeductionsThe most significant change is the new cap on deducting gambling losses. Previously, gamblers could deduct 100% of their losses against their winnings, up to the total amount of their winnings, effectively resulting in $0 taxable income if they broke even for the vear.
As of January 1, 2026, only 90% of gambling losses can be deducted against winnings. This means even if a gambler's losses equal or exceed their winnings, they will still have to pay tax on 10% of their winnings (often referred to as "phantom income"): Example: If you have $100,000 in winnings and $100,000 in losses in 2026, you can only deduct $90,000 of your losses. The remaining $10,000 will be treated as taxable income.
Give us a call at Custom Tax Business Services and we can help walk you through the complexities of the new tax laws
