US President Donald Trump is weighing the idea of eliminating federal taxes on gambling winnings, framing it as a possible next step in his broader tax-cut agenda that already targets tips, overtime pay and Social Security benefits, Fox News reported.
“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 going to have to think about that,” Trump said while responding to reporters.
Trump’s earlier move to roll back taxes on tips and overtime was aided by The One Big Beautiful Bill Act (OBBBA), which he signed into law earlier this year.
‘60% of Americans have engaged in gambling’
Nearly 60% of American adults have gambled at least once in the past year, with 30% visiting a physical casino and 21% placing sports bets, underscoring how widely any change to gambling taxation could be felt, Fox News reported.
How are lottery earnings taxed?
A W-2G form is typically issued to anyone who wins over $600 and the regular withholding rate for gambling winnings of $5,000 or more is 24%, according to the Internal Revenue Service (IRS). The tax applies to lotteries, raffles, horse races and casinos, amongst other forms of gambling.
Casinos and other payers typically issue a W‑2G form for gambling winnings above 600 dollars, and a standard 24% withholding rate generally applies to certain winnings of 5,000 dollars or more. Depending on the size of the prize and whether a Social Security number is provided, federal withholding can rise to as high as 28% or even 31% in some cases.
All gambling winnings must currently be reported on a taxpayer’s Form 1040, regardless of whether a W‑2G is issued. While gamblers may deduct their annual gambling losses, those deductions cannot exceed their gambling income, limiting the extent to which frequent or heavy gamblers can offset winnings with losing bets.
What could change now?
If Trump were to move forward with eliminating federal tax on gambling winnings, it could dramatically reduce the reporting and withholding obligations for casual gamblers while cutting federal revenue drawn from lotteries, casinos, raffles and horse racing.