Managing Editor
The threshold for mandatory handpay for slots and the associated tax withholding has been increased by the IRS to $2,000 starting in 2026. The previous $1,200 threshold had been in place since 1977.
It’s a small bit of good news for gamblers who have otherwise had nothing but bad news on the tax front. Much more impactful is the Big Beautiful Bill’s change to loss deductions, which limits players to offsetting only 90% of their losses against their wins. That change will turn many winners into losers and could mean that even some players who finish in the red end up owing taxes on imaginary winnings.
Efforts to repeal that other change are underway, but so far haven’t borne fruit. The good news is that it won’t become relevant until players are filing in 2027 and lawmakers believe there’s a good chance that it will be reversed next year before it takes effect.
The two changes are related because many gamblers don’t bother to track their actual winnings and losses unless they’ve been subjected to withholding. Technically, everyone is responsible for keeping a detailed accounting of their gambling and reporting their wins and losses honestly for tax purposes. In practice, however, that’s logistically difficult, and it’s even more difficult for the IRS to verify.
That’s why mandatory withholding exists. The IRS assumes that the only gamblers who will end up meaningfully profitable within a calendar year are those who have won a big prize. The agency requires casinos to withhold taxes on any slots jackpots over a certain dollar threshold, as well as any table game payouts of 300x the bet or more. At that point, if the player wants to reclaim any of that money, it’s up to them to do a tally.
Change Doesn’t Come Close to Matching Inflation
Gamblers have been pressuring the IRS to change its reporting threshold for years, and for good reason. Handpays are a massive hassle for everyone involved, and $1,200 — or even $2,000 — is barely worth being called a “jackpot” in the year 2025.
When that $1,200 threshold was first introduced in 1977, it was the equivalent of $6,420 today. To truly keep up with inflation, the threshold would need to be at least $5,000 now and scheduled to double every 20 years or so.
If the IRS waits another 48 years to raise the threshold another 67%, then gamblers in 2074 will need to wait for handpays on the equivalent of $120 in 1977 dollars, not $1,200.
It’s a problem for casinos as well as gamblers, as the need to take a machine offline for a handpay can mean a loss of revenue. For high-denomination slots, it doesn’t require a big multiplier to reach the threshold. For instance, even at its new level, a $100-per-spin slot only needs to hit a 20x multiplier to force a handpay, something that can happen quite regularly for lower-volatility slots.
That may be one of the reasons that high-volaility, bonus-driven slots are so popular in the U.S. Concentrating payouts in bonus features makes it more likely that any “jackpot” triggering a handpay is actually worthy of the name and the hassle.
By contrast, the multiplier-based procedure for table games is much more friendly to players and casinos. Even $10,000-per-hand high roller blackjack doesn’t require reporting for each win, because the 300x requirement means reporting essentially only applies to side bets.
