How often do you see someone win an amount on a slot machine just below that jackpot handpay threshold and hear them say “no taxes?” Turns out that’s not correct.
Let’s use a recent question to explore this for those who aren’t sure how this all works:
I heard that they raised the jackpot level from $1,200 to $2,000 before you have to pay taxes – is this true?
Tonia B.
This is only partially true. What is true is that starting January 1, 2026, the jackpot handpay threshold was raised from $1,200 to $2,000, with future increases occurring based on the rate of inflation annually.
When you win that amount or more on a single spin (regardless of the amount you wagered to win it), you will receive a W-2G document confirming your win, and that document is filed with the IRS, reporting your win. You’ll need to include that with your tax filing the following year.
What isn’t true is that the jackpot handpay level is when you start owing taxes on your winnings. All U.S. citizens are under the law required to report all gambling winnings, regardless of whether the casino reports it or not, and regardless of location (Canada? Cruise ship winnings? Those are all taxable too.)
What is true, though, is that some players will be able to deduct losses against their winnings (up to 90% of losses as of the time this article was written) if they are eligible to itemize on their tax return.
And finally, all of this covers aspects of federal taxes. State laws also apply based on where you live and where you’re gambling, so, for instance, some states still have a $1,200 threshold for reporting (and even automatic tax deduction), even though the federal limit was raised.
So hopefully that helps clarify some of the aspects of what’s happened. And as a reminder, we’re not accountants, and every player has their own unique situations to factor into things (the state issues mentioned above being just one), so we always advise consulting with an accountant who is versed in gambling tax laws to ensure you file accurately and completely.
What a rude awaking when I was informed I didn’t qualify to deduct my gambling losses because I could only take the standard deduction. What I thought was a win turned into a BIG loss at tax time. Thanks for the big screw Uncle Sam.
We’re sorry to hear about the outcome, Vivian, and this is a great example of why everyone should consult with an accountant, as each individual’s circumstances have a role to play in what’s possible, including whether gambling loss deductions are able to be itemized.