OBBB, gaming and taxes: What do tribal casino leaders need to know?
Looking for information on the OBBB’s impact on your ability to write off gambling losses? Read our article here.
The One Big Beautiful Bill (OBBB) Act, President Trump’s major tax and spending cuts bill that he signed on July 4, makes significant changes to the tax code. Among these are new rules that directly affect the casino gaming industry.
Let’s explore these regulatory shifts in greater detail, including how they could affect your casino and what you should do to prepare your business for when they take effect. Understand that the industry is waiting for additional guidance on the interpretation of the new regulation.
New gaming income reporting thresholds
The OBBB changed the general income reporting threshold from $600 to $2,000. However, for the gaming industry, there is some confusion as to whether this change applies only to the 1099-MISC for prizes or also to the W-2 G for slot jackpots.
Both are discussed below while anticipating that the IRS could provide new guidance.
Slot jackpot reporting threshold
Since 1977, gamblers have been required to report slot machine winnings of $1,200 or more to the IRS. Until recently, this limit had remained unchanged for 48 years despite inflation.
A W-2 G must be completed for a slot jackpot. The industry had lobbied heavily for years to raise the limit to $5,000, with additional annual adjustments to keep pace with inflation.
Instead, perhaps seeking middle ground, the OBBB increased the reporting threshold to $2,000. This change, if applicable, will take effect on January 1, 2026.
1099-MISC reporting threshold increased
The threshold for reporting on a 1099-MISC increased from $600 to $2,000. In the gaming industry, this form is used to report income from prizes.
This change is effective January 1, 2026. An important point to note is that this threshold is also subject to inflation-linked adjustments annually, effective January 1, 2027.
Discussions with auditors and clients suggest that filings under $2,000 account for up to 60% of total annual filings. If so, the OBBB would reduce filings by a significant percentage.
What’s causing the confusion regarding the W-2 G?
Here is why there is some confusion about whether the $2,000 filing limit applies to the W-2 G:
- Section 70433 of the OBBB modifies IRC Section 6041(a), raising the general reporting threshold from $600 to $2,000. The American Gaming Association (AGA) interprets this provision to establish the slot threshold at $2,000, as slot winnings are reported using Form W-2 G, which the AGA contends is linked to Section 6041.
- Nevertheless, certain tax professionals contend that W-2 G reporting is governed by IRC Section 3402(q), which was not modified by the OBBB.
Temporary deduction on tips up to $25,000 and overtime income
The OBBB provides a temporary deduction to casino employees on tips up to $25,000 per year from 2025-2028. The new law also provides a temporary deduction on qualified overtime income up to $12,500 for tax years 2025-2028.
It is important to evaluate the tax benefits and reporting burden from these tax deductions that could be available to employees. Businesses need to assess the impact these tax benefits will have on staffing needs.
New gambling losses tax deduction limit
Gamblers who itemized on their taxes were previously able to deduct 100% of gambling losses up to the amount of their gambling winnings. While this deduction is not a major factor for casual casino patrons, it is something that professional gamblers have heavily relied on, as their losses and expenses used to be fully deductible as business losses and expenses.
However, the OBBB reduced the gambling loss deduction from 100% to 90%. This is effective as of January 1, 2026, and will have a detrimental effect on professional gamblers, including poker players.
Taxes on phantom income could harm gaming revenue
The key issue with the gambling loss deduction change is that gamblers could be forced to pay taxes on what’s called phantom income. For example, a gambler who wins $50,000 and also loses $50,000 in a single year would only be able to write off $45,000 worth of losses, creating a $5,000 tax exposure despite not actually earning anything.
The phantom income risk could make the economics of professional gambling less viable for certain patrons as well as affect gaming operations’ revenues.
The gambling loss deduction change could also lead to fewer patrons signing up for player rewards cards, as players may seek to preserve greater anonymity. This could create fresh challenges for anti-money laundering (AML) efforts, as AML often relies on personal identifying information provided by rewards card signups.
Future legislative action may restore the 100% deduction cap. Nevada Sen. Catherine Cortez Masto introduced a bill to do this on July 10, shortly after the OBBB became law. While Senate Republicans blocked her bill, both parties appear interested in revisiting the issue in the future.
What should tribal casino operators do to prepare?
Right now, it’s important to stay abreast of ongoing developments in this new regulatory environment. Keep an eye on guidance issued by the IRS or regulatory bodies over the next several months and consult with your tax advisor to assess what additional actions you may need to take.
If you have relationships with any of your members of Congress or their staff, you may wish to contact them to discuss the 90% deduction limit and how that could affect your business. Congress is more likely to take corrective action in response to advocacy and lobbying efforts from constituents.
It is important to ensure that your internal policies reflect these pending changes. Casinos will need to update slot machine configurations to reflect the new $2,000 limit so that they don’t continue to lock up at $1,200 after January 1.
Finally, make sure that your systems, processes and employees are prepared as well.
How Wipfli can help
We advise tribal gaming and government leaders on how to navigate regulatory changes, improve operational performance and strengthen business fundamentals. Work with our team to assess your tax and business strategy in the wake of the OBBB and chart your path forward. Learn more here or get updates on recent tax policy changes.
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