Mega Millions $323M tax shift
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The most prominent recent development in the lottery industry, based on authoritative coverage and ongoing relevance into early February 2026, involves the implementation of new U.S. federal tax rules affecting lottery and gambling winnings. These changes, effective January 1, 2026, stem from legislation (noted in sources as the "One Big Beautiful Bill Act") and IRS guidance, including raising the reporting threshold for certain winnings and capping loss deductions.
Mega Millions Jackpot Climbs to $323 Million Amid New Tax Rules
The Mega Millions jackpot reached an estimated $323 million for the Tuesday, February 3, 2026, drawing, with a cash option of $145.7 million, following no jackpot winner in the prior draw. Winning numbers were 5, 11, 22, 25, 69, and Mega Ball 21. This rollover continues a pattern of growing multi-state jackpots early in the year, drawing significant player interest.
These developments occur against the backdrop of key federal tax adjustments implemented in 2026. The IRS raised the threshold for mandatory reporting of slot machine and certain gambling winnings on Form W-2G from $1,200 to $2,000, reducing the paperwork burden for smaller jackpots while maintaining tax obligations on all winnings. More significantly for lottery players, gambling losses can now only offset up to 90% of winnings for deduction purposes on federal returns, potentially increasing effective tax burdens for high-prize winners who itemize. Lottery agencies continue to withhold 24% on prizes over $5,000, but winners may owe additional amounts due to bracket impacts and the new cap.
Key Takeaways
- The $2,000 reporting threshold eases administrative burdens for mid-tier wins but does not eliminate tax liability.
- The 90% loss deduction cap could raise net taxes for players with substantial winnings and offsetting losses.
- Growing Mega Millions jackpots highlight sustained player engagement despite evolving fiscal considerations.
These IRS changes, confirmed in late 2025 guidance and now active, aim to modernize reporting amid inflation but introduce new compliance realities for winners. Industry observers note the adjustments primarily affect broader gambling but directly impact lottery prize strategy and after-tax planning. No major regulatory shifts or operator announcements from lottery commissions appeared in the immediate 24-48 hour window, making the jackpot momentum and tax context the leading storyline.
Sources:
- https://www.megamillions.com/ (official draw results)
- IRS guidance references via multiple industry reports (e.g., CDC Gaming, i Gaming Today)
