Treasury and the IRS have proposed regulations (REG-113229-25) that would conform existing regulatory text to statutory changes enacted in the "One, Big, Beautiful Bill Act" (OBBBA). The proposed regulations primarily update information reporting and backup withholding thresholds and revise the rules governing the deduction of wagering losses.

Comments and requests for a public hearing must be received by June 16, 2026.

Background

The OBBBA amended several provisions of the Internal Revenue Code affecting information reporting and wagering losses.

Among other changes, the OBBBA increased the long-standing $600 threshold for information reporting under IRC Section 6041 to a base amount of $2,000 for certain payments made after December 31, 2025, and provided for inflation indexing for calendar years after 2026. Parallel changes were made to IRC Section 6041A and the backup withholding rules under IRC Section 3406. The $600 threshold applied to payments reported on Form 1099-MISC, Miscellaneous Information, Form 1099-NEC, Nonemployee Compensation, Form W-2, Wage and Tax Statement, and Form W-2G, Certain Gambling Winnings, as well as backup withholding for these payments reported on Form 945, Annual Return of Withheld Federal Income Tax. The threshold for information reporting on Form W-2G gambling winnings under IRC Section 6041 regulations was $1,200 for a single winning from bingo and slot machine play and $1,500 for a single winning from keno. Current regulations for these code provisions, however, reference the $600 threshold.

The OBBBA also amended IRC Section 165(d) to limit the deduction for wagering losses to 90% of the amount of such losses during a tax year, and only to the extent of gains from wagering transactions. Current regulations, however, reflect the former rule allowing deduction of wagering losses up to 100% of gains.

Proposed regulations

The proposed regulations would amend tax code provisions to conform regulatory language to current statutory requirements.

For information reporting, the proposed regulations would replace the static $600 threshold with the $2,000 threshold for 2026, with inflation adjustments applying in subsequent years. This $2,000 threshold would also apply to gambling winnings from bingo, keno and slot machine play. Conforming changes would be made across regulations governing reporting under IRC Sections 6041 and 6041A, as well as backup withholding under IRC Section 3406.

In addition, the proposed regulations would revise the wagering loss regulation under IRC Section 165(d) to reflect the new statutory limitation, providing that only 90% of wagering losses may be deducted, and only to the extent of wagering gains. Conforming changes would also be made to the joint return rules for spouses.

The proposed applicability dates generally align with the statutory effective dates, applying to payments made on or after January 1, 2026, and to tax years beginning after December 31, 2025, as applicable.

The following is a general summary of the information reporting considerations:

*Indexed for inflation

** Both thresholds must be satisfied, meaning both the "winnings" exceed the dollar threshold and those winnings are at least 300 times the amount of the "wager" (or ticket price)

The wagering backup withholding threshold is governed by IRC Section 3402(q), which is not affected by the changes to IRC Section 6041. Further, there is no adjustment for inflation on the backup withholding threshold.

Implications

Payors of gambling winnings will have less reporting to payees. Amounts below the new reporting thresholds will still constitute taxable income but payees will only be able to deduct 90% of wagering losses and only to the extent of wagering gains.

Payors subject to Form 1099-NEC and Form 1099-MISC reporting should review the new reporting threshold and affected payments (including any associated business lines and products/transactions). For example, accounts payable departments and business lines making "perk" (or award) type payments may require system updates and enhancements. In addition, not all Forms 1099-NEC and 1099-MISC payments are subject to the reporting change (for example, the $10 threshold remains for royalties and certain substitute payments).