Tax implications of fantasy sports
September 2, 2020
Fantasy sports earnings are taxable and should be reported to the IRS..

If you’re among the nearly 60 million fantasy sports players in the U.S. and Canada, it’s important to understand the tax implications of both your winnings and losses.

Whether you’re creating your fantasy team through DraftKing, Yahoo!, ESPN or any of the other platforms, fantasy sports earnings must be reported to the IRS, just as any other income is. In fact, tax experts say, if you claim to be a professional fantasy player, you may receive some additional scrutiny from the IRS.

Still, a fair amount of uncertainty continues to exist as to how to report fantasy income, as laws have yet to settle on whether fantasy sports betting should be considered gambling or a hobby. The Fantasy Sports Trade Association advocates that fantasy sports, a $7 billion industry, involves skill, not luck.

Regardless, the fact is the 2017 Tax Cuts and Jobs Act eliminated fantasy sports players’ deductions for some losses, while keeping winnings taxable. Keeping accurate and up-to-date documents is critical, financial advisors agree. Note too, that entrance fees no longer qualify as a write-off.

As taxpayers, fantasy players may benefit by treating their fantasy sports betting as gambling, as opposed to a hobby, and eliminating additional fantasy-related expenses.

If you make a net profit of more than $600 on your fantasy sports betting, you’ll need to report that income, as it is also being reported to the IRS. If the winnings are from the major sports leagues, gambling taxpayers will receive a 1099-MISC form to file with their tax return.

Also, keep in mind, you can’t deduct your losses if you don’t report your profits. Additionally, you can’t deduct more for losses than you report for income. For example, if you win $1,000 in one league, and lose $1,500 in another, you can only deduct $1,000. Please note that gambling losses must be itemized.

If you have any questions about the taxation of gambling or gaming winnings/losses, please reach out to one of our tax advisors. We are always happy to help.


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Diamond & Associates CPAs