With Christmas just two days away and Congress now on recess, we can look back at 2025 and accurately view the changes in tax law towards gambling. There was some good, some bad, and one very ugly change.
The Good: The threshold for issuance of most 1099s and slot machine W-2Gs will change in 2026 to $2,000 (and it’s indexed to inflation thereafter). The threshold has been $1,200 since the 1970s. Based on inflation, $1 in 1975 is worth over $6 today. Moving to $2,000 is definitely a step in the right direction. I do need to point out that nothing has changed as to what is taxable (everything, even a gambling win of $1).
The Bad: Oklahoma is going after nonresident gamblers and there are definite constitutional questions involved. If you’re a nonresident of Oklahoma and receive a W-2G at an Oklahoma casino and you don’t file an Oklahoma tax return, expect to get a letter from the Oklahoma Tax Commission. You may be thinking, “Russ, that income was earned in Oklahoma; why wouldn’t it be taxable to Oklahoma?” And that forces us to face a constitutional issue.
All casino gambling in Oklahoma is on Indian reservations. Generally, these are sovereign territories not subject to state income tax. The Oklahoma Tax Commission is taking the position that this rule doesn’t apply to gambling winnings. An Indian tribe can voluntarily cede sovereignty, and a tribe is required (in order to have casino gambling) have a compact with the state. However, I’m unaware of any tribe that has ceded this for taxes. There is ongoing litigation on this issue–but because of federal law each individual must first go through the appeals process in Oklahoma, then file a lawsuit. Eventually, a case on this issue will go to the Supreme Court–but it’s likely going to be many years before this happens. Until then, nonresidents need to be wary about gambling in Oklahoma. It’s especially bad for amateur gamblers as Oklahoma limits itemized deductions to $17,000.
The Ugly: The One Big Beautiful Bill’s provision limiting gambling losses to 90% will go into effect for 2026. (This provision also limits business expenses for professional gamblers to 90% of expenses incurred.) While I do expect this provision to be repealed eventually, I have no idea if this will occur in 2026 or 2035. (If it is repealed in 2026, I expect the repeal to be retroactive to January 1.) This is going to hurt all gambling–and state revenues in states that have enacted high taxes on casino companies (i.e. Illinois, Pennsylvania, etc.).
Will this get repealed in 2026? If our Congress functioned normally it would; however, what I see is very dysfunctional. It’s more likely than not that this provision will not be repealed in 2026.
What will 2026 bring to us? Probably very little in the way of change. I expect legal pressure on sweepstakes gambling and prediction market gambling (it’s quite likely both will be entirely gone from the United States by December 2026). Otherwise, it’s an election year; historically, little happens in such years. Only time will tell if that’s the case for 2026.
