This is one of those times we’re happy to be wrong. We finally have an official confirmation that things are changing around slot machine jackpots.
They waited until the 11th hour, but the IRS posted draft documents this month confirming that starting with tax year 2026, which takes effect on January 1, 2026, the reportable jackpot handpay threshold will increase to $2,000. After months of lack of clarity and speculation without certainty, the documentation has finally caught up to confirm what many hoped had happen with the passage of the One Big Beautiful Bill. While the draft documents still need final sign off, that feels like a formality at this stage.
What this means is now casinos will be able to update their machines to reflect the new threshold, with slots no longer locking up at the $1,200 mark once reconfigured. If a slot is still programmed to lock up at the $1,200 mark in the new year, but the win is under $2,000, there won’t be any paperwork to be completed. It may take some casinos a window of time to finalize updating settings for every slot they have, but that will be a temporary problem.
Also confirmed in the draft documentation is the expectation for these numbers to increase annually with inflation, so this process will be one repeated each year when the new threshold is announced.
While this isn’t the inflation-adjusted number many were hoping for (given the previous number had been set in the 70s, without an update for decades), it’s still going to reduce the frequency players are stopped in their tracks by a jackpot (in the best way, of course). Many Major progressive prizes can grow to the point of what was a “just over the limit” jackpot, and those will now be taken out of the running.
We might also see some new ways slots are designed – the $1,000 maxed out Major on games like Lightning Link and Dragon Link seem designed to reduce the risk of a reportable jackpot handpay from a single hold and spin bonus.
Here’s a reminder of things that haven’t changed:
- Even if a win is no longer reported under the new rules, all gambling wins are considered income in the eyes of the IRS. (It counts in most states too, and states can have different rules on how to report this based on where it was earned and where the player resides.)
- If you’re able to itemize on your federal return, you can write off losses against the winnings. The same bill that made the $2,000 threshold possible also changed how much of your losses can be used to write down the winnings – that number will be 90% of losses in 2026, down from 100% of losses in 2025. While some bills have been proposed to revert this, it hasn’t happened so far.
- Regardless of the size of your losses, you can only write down your winnings on your federal return – if your losses drastically exceed your winnings, you can only write your losses (up to 90% of them) off against the winnings, and not beyond that number.
Hat tip to Vital Vegas for, as usual, being quick to share the details.
Does anyone know exactly how this is gonna happen? Do they have to change all of the machines manually? I spoke with a local slot attendant about this and they have no idea how it’s gonna work yet on 12/28…
Hey Peggy – yes, each machine will need to be reconfigured. Until such time as a casino does that, when a machine locks up, if it’s below the new $2,000 threshold, they’ll be able to go retrieve your cash without any tax paperwork involved, which should make the process faster. Because the IRS guidance came so late, many casinos didn’t officially start looking at next steps until that confirmation, as it wasn’t at all clear that it was being increased until the IRS confirmed it.