EDITORIAL: Finally: Jackpot reporting burden will be eased

While the gaming industry waits on Congress to clean up an inane provision in President Donald Trump’s “one big beautiful bill” that taxes gamblers on winnings they never earned, there is a small bit of good news on the wagering tax front.

The president’s signature legislation, passed in May (House) and July (Senate) without Democratic support, raises the reporting threshold for gambling jackpots. This common-sense reform has been a long time coming. But the IRS has been slow to release the details.

Since 1977, slot winners who hit payouts of $1,200 or more must fill out W-2G forms alerting the IRS to their winnings and sometimes triggering withholding requirements. The $1,200 has been left untouched for nearly five decades despite inflation and growing jackpots.

This week, the IRS finally confirmed that it will increase the threshold to $2,000 beginning Jan. 1 and tying the number to inflation going forward. Jackpots earned prior to that time will be subject to the current rules. The Office of Management and Budget must approve the new rule, which is largely a formality.

The change will help casinos and other operators streamline procedures, reducing the number of times that paperwork requirements will disrupt gaming operations for both establishments and players. Whether this will reduce tips or even employment opportunities remains to be seen.

“For casino operators,” noted Erik Gibbs of NEXT.io this week, “the confirmed adjustment alleviates compliance ambiguity and reduces the volume of lower-value jackpot reporting. For players, it means fewer interruptions during play and less frequent tax documentation for modest wins. The update reflects a broader effort to modernize tax administration in areas where thresholds had become misaligned with current economic conditions.”

Gamblers still owe taxes on all winnings, of course, regardless of whether they get caught up in IRS paperwork demands. But the reform puts more onus where it should be — on the players to properly report their own income.

The change would be much more significant had the legislation based the increase on the consumer price index over the past 48 years.

In fact, Rep. Dina Titus, D-Nev., a longtime advocate of higher thresholds, had previously introduced legislation to boost the number to $5,000. That figure better reflects current reality, but the IRS reform is still a step forward and welcome news to gaming operators and players. Now, about that tax on phantom winnings …