All bets are on as the playoffs quickly approach for both college and professional football. This usually results in an increase of sports betting and daily fantasy sports activity for sites such as FanDuel and DraftKings. While your attention may be turned to setting the perfect lineup and winning some extra cash, you should also be aware of the rules and regulations regarding daily fantasy sports in your state and the tax implications.
Daily fantasy sports sites, FanDuel and DraftKings, have been in the headlines after being banned in several states, most recently New York and Nevada. Their games are being seen as “illegal gambling” under state laws. Even though daily fantasy sports is not considered gambling under federal law, you will still need to report your winnings to the IRS, just as you would gambling winnings.
If you do happen to pick the winning team or cash in on that perfect lineup, the guidelines below will help you accurately prepare your taxes.
Gambling Tax Guidelines
- Record your winnings on your tax return, even if you don’t receive Form W-2G. In some cases, you will receive Form 1099-MISC.
- Report ALL of your gambling winnings, whether they came from lotteries, raffles, horse races or casinos.
- Keep records of your activities in a diary or organizer, and hold on to proper documentation that you may need at tax time. Relevant receipts, tickets, and other information should be stored in a safe place.
- Itemize your deductions if you want to claim your gambling losses. To claim losses as a miscellaneous deduction, your losses cannot be greater than the amount of winnings that you report on your taxes. For example, if you lost $100 but won $25, you can only deduct $25 in gambling losses.
Seek assistance from your neighborhood tax preparer with any tax questions you may have regarding your gambling winnings.