New Federal Gambling Tax Rules for 2026

It’s a new year, and with 2026 comes new tax implications for lottery players, casino gamblers, and sports bettors.

The “One Big Beautiful Bill Act” passed by Congress and signed into law by President Donald Trump included two major tax implications related to gambling.

Higher Slot Machine Hand Pay Threshold

The first is a positive for casino players, as the threshold for a slot machine to initiate a hand pay has been raised from $1,200 to $2,000. The adjustment means a slots player won’t be issued a W-2G form for winning up to $2,000 on a spin.

However, some states will continue to force casinos to halt a slot machine when it wins upwards of $1,200 due to state tax laws remaining at the threshold. But the income won’t be reported to the IRS for purposes of the filer’s federal return.

The slot threshold change is also seen as beneficial to casinos, as their machines will be taken offline fewer times and the overhead of having slot attendants respond to $1,200 wins will be reduced.

Gambling Deduction Limits

A more consequential gambling tax law change in the Republicans’ One Big Beautiful Bill is that, beginning with the 2026 tax year, deductions of gambling losses against winnings are capped at 90%.

Section 70114 of the bill, the “Extension and Modification of Limitation on Wagering Losses,” reads:

For purposes of losses from wagering transactions, the amount allowed as a deduction for any taxable year shall be equal to 90 percent of the amount of such losses during such taxable year, and shall be allowed only to the extent of the gains from such transactions during such taxable year.

That means a gambler who wins $100K playing slots, table games, the lottery, betting on sports, or any other form of gambling can only deduct up to 90% of their losses against their winnings. For example, if a person wins $100K but also loses $100K gambling during a year, they would still need to pay federal taxes on $10K.

Since prediction markets, including those offering sports contracts, are regulated by the Commodity Futures Trading Commission as a type of derivative, the gambling tax change won’t apply. That could bring new sports bettors to prediction markets, online exchanges that the gaming industry greatly opposes on claims that they’re operating unregulated sports betting.

Potential Retroactive Fix in 2026

Nevada’s congressional delegation is seeking to restore the gambling deduction to 100%. Rep. Dina Titus and Sen. Catherine Cortez Masto, both Democrats, say reducing the deduction will drive gamblers to offshore sportsbooks and unregulated casinos, which don’t report wins to the federal government and have few consumer protections in place.

Titus and Cortez Masto are respectively behind the FAIR Bet and FULL House acts, legislation that would restore the gambling deduction to 100%. Both bills could be retroactive, meaning the 2026 tax law might be amended to an effective date of Jan. 1, 2026.