It’s been more than 40 years since the threshold for a jackpot handpay on slot machines has been revisited. We see this question from time to time about when that will be updated:
Is there any hope that the $1200 handpay jackpot for taxes will be increased to at least $1500?
Peggy
You’re a pretty generous one, Peggy – there are a lot of people who want to push for a number much higher than that! If you adjusted the number just for inflation, the $1,200 number today based on when it would set would now be more than $5,000.
Because this is set at the federal level, this would require a change in Congress. And periodically, someone does propose a bill that would update the amount. Last year, for instance, a proposal was made to raise the jackpot level to $5,000. But it never really gets anywhere.
Why? Because although according to IRS rules players are supposed to report ALL wins and ALL losses on their taxes, most don’t, so changing the number would mean a lot less wins reported, and a lot less opportunities to collect taxes on those winnings, since only those who itemize have the opportunity to write off losses against the wins.
So it creates a challenge as it would likely mean the IRS would see less gambling winnings reported, and less taxes to collect on it – it’s a reduction in revenue to the federal government, at a time when deficits already exist, and for many it’s easy to just let the status quo exist and not mess with anything, so that’s what ends up happening.
Benefits for players are obvious, but benefits for casinos exist, who would have less paperwork to manage and less downtime on machines as slot attendants handle fewer handpays (which means perhaps less slot attendants needed too). However, none of this generates any benefits at the federal level, unfortunately.
So while there’s hope, we wouldn’t put a lot behind it right now, as unless something major happens that nudges congresspeople to move on this issue, it’s one of those things that likely will get some lip service but ultimately won’t change anytime soon.
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Who proposed the legislation and where can we write them. If we flood in requests, we could make a difference.
This article was posted over a year ago; legislation (and regulation changes, as was proposed last year) get proposed every so often but tends to not make it past the proposal stage. The IRS proposed a change, but the commissioner of the IRS changed since the proposal, meaning it’d need to be picked up by the new commissioner. Generally speaking, reaching out to your local senator and congressman is a good step to let them know you support efforts to raise the reporting threshold. But since many players don’t tend to follow existing tax rules to report all gambling wins and losses, and only tend to report with the forms, the change is expected to yield a drop in tax collection, and so there tends to be some hesitation.