Federal legislation introduced today by the Congressional Gaming Caucus aims to significantly increase the threshold for IRS reporting on slot machine jackpots.
The proposed bill, creatively named the SLOT Act — or “Shifting Limits on Thresholds Act” — is a bipartisan effort led by US Representatives Dina Titus (D-Nevada) and Guy Reschenthaler (R-Pennsylvania), co-chairs of the Congressional Gaming Caucus. If enacted, the SLOT Act would raise the jackpot tax reporting threshold from $1,200 to $5,000, a more than 300% increase.
Representatives Titus and Reschenthaler argue that the current IRS threshold, unchanged since 1977, is outdated and necessitates revision due to inflation. They point out that the number of jackpots triggering IRS reports has surged, creating unnecessary burdens on both the gaming industry and patrons.
“Due to inflation, the number of jackpots hitting that threshold, triggering a shutdown of the machine and necessitating excessive paperwork requirements for the patron, has increased dramatically,” said Titus. “This creates an unnecessary burden on the gaming industry, an economic driver for Southern Nevada and other communities nationwide where slot machines exist.”
Industry Support
Under current US tax laws, casinos must suspend a slot machine’s operation whenever a player wins $1,200 or more in a single spin. Casino employees must then complete a W-2G form, an IRS tax document for reporting gambling winnings as income.
The American Gaming Association (AGA) has voiced its support for the SLOT Act. The casino trade group argues that increasing the W-2G threshold would alleviate “unnecessary administrative burdens on casino operators.” The AGA asserts that the bill would modernize IRS regulations concerning slot machine jackpots.
According to the US Labor Department’s Consumer Price Index, $1,200 in 1977 is equivalent to $5,567 today.
Reschenthaler, representing a state with one of the largest gaming markets in the US, notes that the current $1,200 IRS threshold is costly for casinos.
“Because the threshold has not kept up with inflation, it has resulted in a drastic increase in reportable jackpots, which trigger tax burdens for winners and compliance burdens for casinos. Increasing the threshold will eliminate this onerous red tape, ensuring the gaming industry can continue to support good-paying jobs and foster economic growth in Pennsylvania and across the country,” Reschenthaler stated.
Tax Concerns
Fewer mandatory W-2G forms could result in fewer slot winnings being reported to the IRS. Gamblers are legally required to report all gambling winnings as “other income” on a 1040 tax form. However, recreational gamblers often fail to do so. The IRS W-2G form is a mechanism for the federal government to ensure it receives its share of larger wins.
In late 2020, Congress instructed the US Treasury Department to conduct a study on the potential impact of raising the slot tax form threshold on overall gaming taxes. The report is now nearly a year overdue.
“While I believe appropriate taxes should be collected on winnings, raising the threshold would reduce paperwork and ensure this is accomplished more efficiently,” Titus concluded.
