Current IRS rules on gambling winnings

The possibility of removing federal taxes on gambling winnings raised new questions about future reporting and withholding obligations for operators, after President Donald Trump said he is considering the idea during an Air Force One exchange.

Federal regulations require casinos, sportsbooks, lotteries and other gambling entities to issue a W-2G form for winnings over $600. The Internal Revenue Service (IRS) sets a 24% withholding rate for payouts of $5,000 or more. The rules cover lotteries, raffles, horse racing and casino games. Depending on circumstances, up to 28% of a prize can be withheld for federal income tax when winnings exceed $5,000, and that level increases to 31% if a Social Security number is not provided.

All gambling income must be reported on Form 1040. Annual gambling losses may be deducted but only up to the total amount of gambling income reported for the year.

Trump’s comments on potential tax changes

When asked whether he would support eliminating federal taxes on gambling earnings, Trump said he had not decided. "We have no tax on tips, we have no tax on Social Security, and we have no tax on overtime," he said. "No tax on gambling winnings, I don't know. I'm gonna have to think about that."

The One Big Beautiful Bill Act (OBBBA), which Trump signed earlier this year, included provisions removing federal income taxes on tips and on overtime.

Gambling participation and industry impact

Industry figures indicate the scale of gambling participation. Nearly 60% of American adults gambled in the past year, the American Gaming Association reported. Thirty percent gambled at a physical casino and 21% placed sports bets.

Federal thresholds determine reporting and withholding requirements for gambling operators. Trump did not provide a timeline for further review.

For now, operators and bettors remain subject to IRS reporting rules, withholding rates and annual filing obligations unchanged under federal law.