Starting January 1, 2026, the IRS raised the W-2G reporting threshold to $2,000. If your nonprofit runs raffles or any form of charitable gaming, this change affects how you handle winner paperwork. It is good news in terms of administrative burden. But “less paperwork required” is not the same as “no rules to follow,” and the details still matter.
Here is what changed, what it means for raffles and other charitable gaming activities, and what your organization should do with this information.
DISCLAIMER
This article reflects our interpretation of IRS guidance and publicly available information. We did our best to be accurate, but we could be wrong, miss context, or misunderstand something.
We are not the IRS and we are not attorneys or CPAs. This is not legal or tax advice and should not be treated as official guidance. Rules can change, and your specific situation matters.
If you run charitable gaming or award prizes through raffles, consult a qualified CPA or tax professional with questions about your reporting obligations.
What is a W-2G and Why Does It Matter for Charitable Gaming?
Form W-2G is an IRS information return. When a nonprofit awards a prize through a raffle, bingo game, pull tab, or other charitable gaming activity that meets certain thresholds, it is required to issue a W-2G to the winner and file a copy with the IRS. The winner uses it when they file their taxes. The nonprofit handles the paperwork and, in some cases, the withholding.
For organizations running raffles and other charitable games, this has historically created administrative overhead around smaller prizes, prize winners who didn’t expect tax forms, and withholding requirements that required careful cash management.
What Changed
The old W-2G reporting threshold for most gambling winnings, including raffle prizes, had not been meaningfully updated since 1977. For raffles and sweepstakes, the general trigger was $600 or more in winnings, provided the amount was also at least 300 times the ticket price.
Effective January 1, 2026, the IRS updated its W-2G instructions to reflect a new minimum reporting threshold of $2,000. The threshold will also be adjusted for inflation going forward starting in 2027.
This change came out of the One Big Beautiful Bill Act, enacted in mid-2025. The IRS confirmed the updated instructions on January 12, 2026.
How the Math Works for Raffles
For raffles and sweepstakes, two conditions have to be met before a W-2G is required:
- The prize value (minus the ticket price) meets or exceeds the reporting threshold
- The prize is at least 300 times the ticket price paid
With the new $2,000 floor, here is what that looks like in practice:
- A $5 ticket wins a $1,500 prize: the 300x rule is satisfied ($5 x 300 = $1,500), but the prize still falls under the new $2,000 threshold, so no W-2G is required.
- A $5 ticket wins a $2,500 prize: $2,500 exceeds both the $2,000 threshold and the 300x amount of $1,500, so a W-2G is required.
- A $10 ticket wins a $2,500 prize: the 300x rule requires $3,000 ($10 x 300), which is not met, so no W-2G required even though the prize exceeds $2,000.
The practical result is that more prizes in the lower-to-mid range now fall under the threshold, reducing the number of W-2Gs nonprofits need to issue.
What Did Not Change: The $5,000 Withholding Rule
One thing is not affected by this update. When a prize exceeds $5,000, whether through a raffle, bingo, or any other charitable game, the nonprofit is still required to withhold federal income tax from the winnings and report it using Form W-2G. That rule was not changed.
If you are awarding large prizes, say a vehicle, a vacation package, or high-value cash prizes, this withholding obligation still applies the same as before. The nonprofit must issue the W-2G and withhold 24% of the gross proceeds (winnings minus the wager amount), and send the withheld taxes to the IRS using Form 945.
Maine state withholding applies on top of that. Under Maine law, when a prize triggers federal withholding, the paying organization is also required to withhold Maine state income tax from the same winnings. Maine’s withholding rate is tied to the state’s highest marginal income tax rate, which is currently 7.15%.
The practical point: if your organization awards a prize that triggers withholding, the combined federal and state withholding rate is 31.15%. On a $6,000 prize with a $5 wager, that is roughly $1,865 withheld before the winner sees a dollar. Make sure your winner intake process accounts for this, and confirm the details with a CPA if large prizes are involved.
Prizes Are Still Taxable Income for Winners
This is worth saying clearly. The higher reporting threshold does not mean smaller prizes are tax-free. Gaming winnings are still taxable income whether or not the winner receives a W-2G. This is an IRS reporting mechanics change, not a tax exemption.
Your winners should be aware of this too, especially if they win a mid-size prize and do not receive a form. It is worth noting on your raffle pages, event materials, or winner communication that prizes are taxable income, even when no W-2G is issued.
What to Do Next
- Talk to your CPA about the updated thresholds.
The new $2,000 floor changes when a W-2G is required. Make sure your prize tracking and winner documentation processes are updated to reflect the new rules. - Collect winner information at every event, even when a W-2G is not required.
Name, address, and contact details are good records to keep regardless of whether a form is issued. - Give large-prize winners a heads-up about withholding before the drawing.
If a prize is over $5,000, the winner will have 31.15% withheld on the spot. That is a significant amount, and surprised winners create friction. A simple note in your raffle materials or winner communication sets the right expectation upfront. - Treat the $2,000 change as a floor adjustment, not a clean slate.
The 300x rule and the $5,000 withholding threshold are both still in effect. Fewer W-2Gs required does not mean no W-2Gs required. - Bookmark IRS Publication 3079 (can be found here)
It is the most relevant IRS reference for nonprofits running charitable gaming and covers W-2G requirements in full.
The Compliance Part Does Not Have to Be Hard
Running a compliant raffle involves a lot of moving pieces, and federal tax reporting is just one of them. Between Maine’s charitable gaming licensing requirements, Maine Gambling Control Unit reporting, and IRS obligations, the list of things to get right keeps growing.
Maine Online Raffles is built to handle the platform and compliance infrastructure so your organization can focus on the fundraising. We work with Maine nonprofits to set up and run legal, donor-friendly raffles from start to finish, including the systems and records that keep everything organized when it is time to report.
If you are planning a raffle this year and want a setup that keeps you on the right side of both Maine and federal requirements, we would be glad to help.
