IRS Slot Threshold Update Brings Mixed News for Gambling Industry

After months of uncertainty, clarity finally arrived from the IRS. A draft update to the 2026 tax code confirmed that the federal slot win reporting threshold will rise from $1,200 to $2,000 next year. For casino operators, the change checks off a long running priority.

Yet relief on one front came paired with new anxiety on another.

Good to Know

• Slot win reporting rises to $2,000 starting in 2026
• Gambling loss deductions drop from 100% to 90%
• Lawmakers have not restored the full deduction

Slot Reporting Relief Finally Takes Effect

Casino operators waited for confirmation, and the IRS draft memo delivered it. The slot reporting threshold increase included in the OBBB will move forward in 2026.

Under current rules, slot machines must shut down after a win above $1,200 while paperwork gets completed. That pause disrupts play and adds work for staff. The limit has stayed frozen since 1977, even as inflation reshaped casino economics.

Industry groups including the American Gaming Association pushed for change for decades. A $2,000 threshold still falls short of inflation adjusted goals closer to $5,000, but operators view the update as progress.

American Gaming Association CEO Bill Miller wrote in a July letter that the higher threshold will reduce compliance strain for players and operators while cutting unnecessary IRS paperwork.

Casino gaming also looks very different than it did when the rule began. Legal casino play now spans roughly 1,000 commercial and tribal casinos across 43 states.

Gambling Loss Deduction Creates New Tension

The same bill delivered less welcome news for gamblers. Starting in 2026, players can deduct only 90% of gambling losses against winnings.

A gambler who wins and loses $100,000 in the same year would owe taxes on $10,000 they never actually kept. High volume sports bettors and poker players feel the impact most.

Those players represent a small share of taxpayers but drive large portions of casino and sportsbook revenue. Industry voices warn the rule could push them away from regulated markets, reducing liquidity and altering odds for casual players as well.

Miller warned Congress that the policy taxes phantom income and singles out a legal, regulated activity.

Nevada Representative Dina Titus introduced a short bill to restore the full deduction, earning bipartisan support. Even with public backing from House Ways and Means Chair Jason Smith, the bill has not advanced to a vote.

With limited legislative time left before the change takes effect on Jan. 1, supporters remain hopeful but realistic. The slot reporting update offers a clear win for casinos, while the unresolved deduction cut threatens a far broader impact across the gambling ecosystem.

FAQ

When does the new slot reporting threshold start?

The $2,000 threshold takes effect in 2026.

Why did casinos want the increase?

The old $1,200 limit dated back to 1977 and caused frequent game interruptions.

How does the loss deduction change work?

Gamblers can deduct only 90% of losses against winnings starting in 2026.

Is Congress still trying to reverse the deduction cut?

Yes, but no vote has occurred yet.

Who feels the biggest impact from the new rule?

High volume sports bettors, poker players, and casinos that rely on their activity.

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