Flag On the Play! Fantasy Sports Have Real Penalties.
Fall is just around the corner and that means that football season has officially begun. In offices, dorms and living rooms across America, fantasy football is also gearing up! An estimated 57 million to 75 million people join leagues through hosting sites like Draftkings, Yahoo!, ESPN and FanDuel every year. Just like the NFL draft, a fantasy draft allows you to pick and choose players from different positions and teams to put together the best team possible. The result is a virtual team that you keep up with on your phone, tablet, or desktop. Each position scores points for different plays. But why does it matter?
Dedicated players know if you draft the right teams, you could win some serious cash by the end of the season! In this game, strategy pays off. But did you also know that you are accountable for reporting those earnings to the IRS? Read on if you think your fantasy football team will win big this year.
Do I have to pay taxes on fantasy sports winnings?
If your net profit from playing fantasy football is $600 or more, you will need to report your winnings as “other income” on your tax return. The major hosting players know the deal. If you win more than $600, you’ll receive a Form 1099-Misc from whoever hosts your league. The income from your fantasy sports winnings is treated just like any other cash prize or gambling win. The IRS also receives the same information about your net profit. So yes, your winnings are tracked on their end as well.
What if I didn’t receive a 1099-Misc?
If you don’t receive the Form 1099-Misc from your fantasy sports host site, it does not mean you are free and clear from tax liability. You will still be accountable for your income if it is over $600. It’s always a good idea to keep track of your winnings so you report them accurately on your tax return.
Are there tax deductions for fantasy sports?
Not at this time. Before the Tax Cuts and Jobs Act (TJCA), you might have written off the entrance fees under miscellaneous deductions. But the TJCA eliminates this write-off. If this affects you, listen up! The tax laws changed in 2018 and got rid of the miscellaneous deductions. Read more about it here.
Can I claim gambling losses for fantasy sports?
The general rule for claiming gambling losses says that you can never deduct more for losses than you report as income. So if you win $1,000 and lose $1,500 in another league, your deduction is limited to just $1,000. You can’t simply deduct your losses without reporting your wins. Also note that to report gambling losses, you must choose to itemize your deductions instead of taking the standard deduction.
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This article is up to date and accounts for tax law changes for tax year 2018 (tax returns filed in 2019). Learn more about tax reform enacted under the Tax Cuts and Jobs Act here.