President Donald Trump said recently he may consider eliminating the federal tax on gambling winnings, as part of a broader push to ease the tax burden on working Americans.
Speaking to reporters aboard Air Force One on Tuesday, Trump was asked if he would potentially remove the tax on gambling income. “We have no tax on tips, we have no tax on Social Security, and we have no tax on overtime,” he said.
“No tax on gambling winnings, I don’t know. I’m gonna have to think about that.”
Trump’s comments follow the passage of the One Big Beautiful Bill Act earlier this year, which included provisions to eliminate federal taxes on tips and overtime pay.
The idea of removing taxes on gambling income appears to be under early consideration, but no formal proposal has been announced.
According to the American Gaming Association, nearly 60% of American adults gambled in the past year. About 30% visited a physical casino, while 21% placed sports bets.
How Gambling Winnings Are Taxed Now
Under current IRS rules, all gambling winnings are considered taxable income. This includes cash and the fair market value of non-cash prizes like trips or cars. It applies to everything from lotteries and raffles to horse races and casino games.
Anyone who wins more than $600 in certain types of gambling must be issued a Form W-2G, and all gambling income must be reported on Form 1040 or 1040-SR. Even if a W-2G isn’t provided, the IRS still requires individuals to report all winnings.
For large wins, typically over $5,000, federal tax withholding kicks in at 24%. That amount can increase to 31% if the winner doesn’t provide a Social Security number.
Losses can be deducted, but only if the filer itemizes using Schedule A. The deduction can’t exceed the amount of reported winnings. Detailed records must be kept to back up any claimed losses.
For nonresident aliens, gambling winnings are also taxable, but deductions for losses are generally not allowed unless covered under a tax treaty, such as with Canada.
As of now, the IRS maintains that gambling income is fully taxable, and there’s no exemption in place.
Why It Matters
The idea of scrapping this tax could have a real impact on casual gamblers. A person who hits a $10,000 jackpot at a casino could currently lose $2,400 or more to the IRS.
Removing the federal cut might mean more of those winnings stay in the winner’s pocket.
Legal sports betting has exploded in popularity since a 2018 Supreme Court ruling allowed states to regulate it. Dozens of states now offer online and in-person sports wagering, and casino revenues have been hitting record highs.
Removing the tax on gambling winnings could further boost participation in an industry that’s already surging.
What Comes Next
Trump has not yet introduced any legislation or executive action to remove the gambling winnings tax.
However, given that he has already acted on taxes related to tips and overtime, his comments are likely to spark discussion among policymakers and within the gaming industry.