Raising the long-standing $1,200 IRS slot jackpot reporting threshold to $2,000 was a long time coming. Just how long requires a short trip back in time.
Think back if you will to May of 2020, less than six years ago, yet for some reason an eternity given that it was the height of the COVID-19 pandemic. The temporary closure of all 989 commercial and tribal casinos in the United States in many respects seems a distant memory today, as does the American Gaming Association’s (AGA) press release which advocated raising the slot jackpot threshold.
The AGA’s position was lost in the more impactful news of the day. It was nevertheless important and timely because the $1,200 threshold regulation had been enacted in 1977, prior to the expansion of state-regulated casino gambling across the country via riverboat and Tribal legislation.
Slot players were keenly aware that a jackpot of $1,200 or more triggered a chain of events which became a familiar sight on casino floors.
The hope in May of 2020 was that the threshold would be raised to $5,000. A live webinar titled “The Post-Election Landscape and Implications for Gaming” hosted by Chris Cylke, Senior Vice-President of Government Relations for the AGA, was conducted at G2E that year.
Bill Miller, President and CEO of the AGA, was critical of the $1,200 threshold and the fact it had been unchanged for 43 years, stating, “The current threshold is outdated and imposes significant compliance burdens on both the IRS and the gaming industry”.
In 2020, it was estimated that a proposed $5,000 threshold was equivalent to $1,200 in 1977, factoring in the rate of inflation.
The AGA presented statistics that revealed slot jackpots had steadily increased over the previous four decades. At the same time, there had been a substantial increase in the number of reportable jackpots, creating operational inefficiencies and adding to the increase of W-2G forms having to be processed by the IRS.
Cylke reported during the 2020 webinar at G2E that there was a “house-approved provision” that could force the Treasury Department to address the threshold and report back to Congress within 90 days. He said that support was building within the Trump Administration.
Miller said: “The increased threshold would not only enable the IRS to focus its limited enforcement resources on those taxpayers who are most likely to have net slot winnings at the end of the year but would also significantly reduce close interactions between gaming employees and patrons to issue tax forms.”
He concluded by saying “The policy change, supported by bipartisan members of Congress, was already long overdue prior to the pandemic, and now has the additional importance as the gaming industry emerges from this (COVID-19) crisis.”
That was long ago and far away. Four years slipped by with no action until the 2025 passage of the “One Big Beautiful Bill Act” which included that, starting January 1, 2026, slot players in the United States would not have to report slot jackpot winnings that are under $2,000.
The $2,000 amount, according to the IRS, had been arrived at to reflect inflation and that it would be revisited moving forward. Meanwhile, the AGA continues to advocate for a $5,000 threshold.
This columnist ventures an opinion that the elimination of all the excessive paperwork and time for casinos comes with a price.
Hand-pay slot jackpots and the “pomp and circumstance” revolving around hitting a “big one” is an event that carries with it a good deal of old-school marketing value, which arguably outweighs the increased staffing and compliance costs.
The machine shutting down, celebratory electronic music playing, the “Hand Pay” message on the screen, and of course the amount of the jackpot on the meter always attracts attention to such an extent that some guests make it a point to stop by and see what all the commotion is about.
There’s the arrival of the slot attendant to acknowledge the jackpot and collect the player’s ID, followed by returning with the necessary paperwork, the winnings, and a casino employee to witness the transaction.
Finally, there is the exhilarating feeling of having the attendant count out the winnings bill-by-bill into your open hand, usually before an admiring audience of onlookers who saw living proof that jackpots do happen. Energized, they would then venture off to find a machine with hope that it will happen to them, too.
Such celebrations are destined to occur with far less frequency, yet what can never be taken away is the thrill that players experience when making a five-figure hit on their favorite game.
