Winning a big jackpot sounds amazing until you realize the IRS wants a piece of it.
New tax rules in 2026 Gambling Tax Changes change how much you owe, when you need to report your winnings, and what happens if you don’t follow the rules correctly.
New tax rules in 2026 change how much you owe, when you need to report your winnings, and what happens if you don’t follow the rules correctly. Understanding the 2026 Gambling Tax Changes is essential for every gambler.
Starting in 2026 Gambling Tax Changes, the IRS raised the slot jackpot reporting threshold from $1,200 to $2,000, but winners still face a 37% federal tax rate on large prizes and can only deduct 90% of gambling losses instead of 100%.
These changes affect not just slot players but lottery winners and anyone who hits a major prize.
The difference between understanding these rules and ignoring them could cost you thousands of dollars in penalties or unexpected tax bills.
I’ll walk you through the new reporting thresholds and explain how federal and state taxes stack up on your winnings.
Whether you play slots occasionally or just bought a lottery ticket, knowing these rules protects your money and keeps you compliant with tax laws.
With the upcoming 2026 Gambling Tax Changes, it’s crucial to stay informed to avoid any surprises during tax season.
Understanding the 2026 Gambling Tax Changes
Key Takeaways
- The IRS increased the slot jackpot reporting threshold to $2,000 in 2026, meaning smaller wins don’t require tax forms.
- Lottery winners pay 24% withholding upfront but owe up to 37% federal tax on large jackpots, plus state taxes in most locations.
- Gamblers can now only deduct 90% of their losses against winnings, creating potential tax bills even when losing money overall.
Starting January 1, 2026, two major federal tax changes affect jackpot winners: a new 90% cap on deducting gambling losses and a raised reporting threshold of $2,000 for slot machine wins.
These changes stem from recent legislation and will impact how much tax you owe and how often you receive tax forms.
Gambling Loss Deduction Limit: The New 90% Rule
The biggest change for 2026 is a new federal limit on gambling loss deductions.
You can now only deduct 90% of your documented gambling losses, even if you itemize your taxes.
If you win $10,000 and lose $10,000 during the year, you would have broken even in 2025.
But in 2026, you can only deduct $9,000 of those losses, leaving $1,000 of taxable income, even though you didn’t actually profit.
This creates what many call “phantom income.”
You owe tax on money you didn’t really win.
The impact gets worse with higher volume.
If you have $50,000 in winnings and $30,000 in losses, in 2025 you’d pay tax on $20,000.
In 2026, you can only deduct $27,000 (90% of $30,000), leaving you with $23,000 of taxable income—$3,000 more than before.
Slot Jackpot Reporting Threshold Raised to $2,000
he IRS raised the W-2G reporting threshold for slot machine jackpots from $1,200 to $2,000.
This is the first increase since 1977.
If you hit a slot jackpot between $1,200 and $1,999, the casino won’t issue you a W-2G form or withhold federal taxes.
You still owe tax on those winnings, but you won’t deal with immediate paperwork at the casino.
Key points about the new threshold:
- Applies only to slot machines and certain other gaming machines.
- Takes effect January 1, 2026.
- Reduces tax reporting burden for smaller jackpots.
- Doesn’t change your actual tax liability.
The American Gaming Association supported this change, noting it would reduce administrative work for both casinos and players.
Impact on Professional Gamblers and High-Volume Players
The 90% loss deduction cap hits high-volume bettors the hardest.
If you place many bets with a small profit margin, your tax bill can exceed your actual winnings.
Consider a sports bettor with $200,000 in winnings and $195,000 in losses.
Their real profit is $5,000.
In 2025, they’d pay tax on $5,000.
In 2026, they can only deduct $175,500 (90% of losses), creating $24,500 of taxable income.
This creates serious problems for professional gamblers.
You might owe thousands in taxes despite modest real-world profits.
Many professionals will need to factor this tax as a cost of doing business.
I recommend these steps if you bet frequently:
- Keep detailed records of every bet.
- Plan for quarterly estimated tax payments.
- Consider the 90% cap when calculating expected value.
- Consult a tax professional familiar with gambling income.
What the One Big Beautiful Bill Act Means for Gamblers
The One Big Beautiful Bill Act (also called OBBBA) created both tax changes affecting gamblers in 2026.
President Trump signed this legislation, which bundled various tax reforms.
The Act includes the 90% gambling loss deduction limit and authorized the IRS to raise the slot jackpot reporting threshold.
These provisions take effect for tax year 2026.
The standard deduction also increased under this law.
For 2026, it’s $16,100 for single filers and $32,200 for married couples filing jointly.
This matters because you must itemize deductions to claim gambling losses at all.
Many people won’t itemize because the standard deduction is higher than their total itemized deductions.
If you take the standard deduction, you can’t deduct any gambling losses.
This means you’d owe tax on all your winnings with no offset for losses.
Special Considerations and Compliance Tips
Winning a jackpot means dealing with different tax rules depending on where you live and your residency status.
The IRS has specific documentation requirements that all winners must follow, and state tax laws can add another layer of complexity on top of federal rules.
Tax Rules for US Expats and Non-Resident Aliens
Non-resident aliens face a flat 30% federal tax rate on gambling winnings, which is higher than what most US citizens pay.
The casino or lottery operator withholds this amount automatically before you receive your payment.
There’s no option to reduce this withholding rate by claiming losses.
US citizens living abroad still owe US taxes on gambling winnings.
I need to report all jackpots on my federal tax return regardless of where I’m living.
Tax treaties between the US and other countries sometimes offer relief from double taxation, but the rules vary by country.
Non-resident aliens cannot claim the standard deduction or itemize gambling losses to offset winnings.
The 30% withholding is typically the final tax, meaning I don’t need to file a US tax return unless I have other US income sources.
IRS Documentation and Reporting Requirements
The One Big Beautiful Bill Act raised the slot machine reporting threshold to $2,000 starting January 1, 2026.
This means casinos only issue Form W-2G for slot wins of $2,000 or more, compared to the old $1,200 threshold.
I must keep detailed records of all gambling activity throughout the year.
The IRS requires:
- Date and type of gambling activity
- Name and address of the gambling establishment
- Names of other people present with me
- Amounts I won and lost
Casinos issue Form W-2G when wins meet certain thresholds: $1,200 or more from bingo or slot machines (now $2,000 for slots in 2026), $1,500 or more from keno, $5,000 or more from poker tournaments, or any winnings subject to federal withholding.
I need to report all gambling winnings on my tax return even if I don’t receive a W-2G form.
The American Gaming Association emphasizes that players remain responsible for accurate reporting regardless of whether they receive tax forms.
State Laws vs. Federal Jackpot Tax Rules
State tax rates on gambling winnings vary widely across the country.
Some states like Florida, Texas, and Nevada have no state income tax, meaning I only pay federal taxes on jackpots.
Other states tax gambling winnings at their regular income tax rates.
A few states impose special gambling withholding rates separate from their standard income tax.
I need to check my state’s specific rules because they can differ significantly from federal requirements.
Some states tax all gambling winnings regardless of where I won the money.
If I live in California but win a jackpot in Nevada, California doesn’t tax gambling winnings at all.
But if I live in a state that does tax gambling income, I might owe state taxes on out-of-state wins.
I can often claim a credit on my home state return for taxes paid to other states.
This prevents double taxation when I win in a different state than where I live.
The new 90% loss deduction cap under the One Big Beautiful Bill Act applies only to federal taxes and doesn’t automatically change state rules.
Frequently Asked Questions
The 2026 tax year brings significant changes to how gambling winnings are reported and taxed, including a new $2,000 jackpot reporting threshold and a 90% cap on gambling loss deductions that affects how much you can offset against your winnings.
How do the 2026 tax reform changes affect gambling winnings reporting?
I need to explain that gambling winnings remain taxable income in 2026, just as they were before.
The IRS still requires you to report all gambling winnings on your tax return, regardless of whether you receive a tax form from the casino or sportsbook.
The biggest change I’ve seen is the new limit on gambling loss deductions.
Starting in 2026, you can only deduct 90% of your documented gambling losses, even if you itemize deductions.
This means if you break even for the year with $10,000 in winnings and $10,000 in losses, you can only deduct $9,000 of those losses.
This creates taxable income of $1,000 even though you didn’t actually profit.
The new rule fundamentally changes how the IRS treats gambling activity by taxing gross activity rather than your true net results.
Can you explain the updated W2-G reporting thresholds for jackpots in 2026?
The IRS raised the minimum threshold for slot machine jackpot reporting from $1,200 to $2,000 starting January 1, 2026.
This marks the first increase since 1977 and means you won’t receive a W-2G form for slot wins below $2,000.
I should clarify that this change only affects when casinos must issue you a W-2G tax form.
You still owe taxes on all gambling winnings, whether you get a form or not.
The higher threshold simply reduces paperwork for smaller jackpots.
Other W-2G thresholds remain in place for different types of gambling.
These include the $600 and 300-times-your-bet trigger for certain wager types and specific thresholds for poker tournaments and other games.
What are the implications of the ‘Big Beautiful Bill’ on 2026 jackpot taxes?
The One Big Beautiful Bill raised the slot machine reporting threshold to $2,000. The legislation also changed the standard deduction amounts for 2026.
The new standard deductions are $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household. These higher deductions create a challenge for gamblers.
To claim gambling losses, you must itemize deductions. But the higher standard deduction makes itemizing less useful for many people.
If your itemized deductions are not greater than the standard deduction, you cannot benefit from deducting gambling losses.
Higher reporting thresholds mean fewer small wins require paperwork. The 90% loss cap and higher standard deductions may result in more tax owed for some gamblers.
Are there new deductions for gambling losses under the 2026 tax code revisions?
The 2026 rules do not introduce new deductions for gambling losses. Instead, they limit existing deductions by capping them at 90% of documented losses.
Before, you could deduct gambling losses up to the amount of your winnings if you itemized. Now, you can only deduct 90% of those losses, so 10% is taxed.
This rule applies to both casual players and high-volume bettors. The effect is greater for those who bet large amounts with small profit margins.
If you win $200,000 and lose $195,000, your real profit is $5,000. Under the 90% rule, you can only deduct $175,500, so your taxable income is $24,500 instead of $5,000.
You must keep detailed records to claim losses. The IRS requires documentation like betting tickets, account statements, and logs of your wagers and results.
How do sports betting winnings get taxed under the 2026 IRS rules?
Sports betting winnings are taxed the same as other gambling income in 2026. All winnings must be reported as taxable income.
The 90% loss deduction cap applies to sports betting losses as well. High-volume bettors may end up with taxable income that is higher than their actual profit.
If you place many bets with a small profit margin, the 90% cap can create extra taxable income. Even breaking even or making a small profit can lead to a large tax bill.
Federal withholding may apply to large payouts that meet W-2G reporting thresholds. Most sports betting wins do not reach these thresholds, so withholding is not automatic.
Active bettors should plan for estimated tax payments, since their final tax bill may be higher than any withholding.
What should taxpayers know about the taxation of gambling winnings in California for 2026?
California doesn’t tax gambling winnings at the state level. The state has no personal income tax on prizes or awards.
However, I still owe federal taxes on all gambling winnings regardless of where I live. California residents report gambling income on their federal returns.
The higher federal tax burden in 2026 isn’t offset by any state-level break in California. If I win money gambling in another state, I might owe taxes to that state even if I’m a California resident.
Each state has different rules about taxing non-residents’ gambling income.
