Claim Gambling Winnings On Your Taxes

The information in this article is up to date through tax year 2019 (taxes filed in 2020).

An estimated 57 million to 75 million people join fantasy football 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. Dedicated members know if you draft the right teams, you could win big by the end of the season.

Also, you must distinctly claim your allowable gambling losses. It is unknown to many that the IRS does not permit reducing or netting, gambling winnings by gambling losses and just reporting the difference. Well, it is considered that such a person owes the IRS back taxes, interest and penalties. You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040 or 1040-SR) PDF and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return. You can’t deduct the cost of your wager from your winnings when determining how much you won, but you can deduct your gambling losses subject to certain rules. You must itemize your deductions to claim your gambling losses as a tax deduction. You should also have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings to support your deduction claim. If you won money and lost money, you have to report those amounts separately—winnings are reported as “Other Income” on Form 1040, and losses are reported as a deduction on. Claiming gambling winnings on your state tax return isn't the same as gambling in the state. There are many places in America, and the rest of the world, where gambling is legal. There is no way the state can know if your gambling is legal or illegal. But as an aside, the correct way to claim illegal money is as misc. Income, without any.

But did you also know that you are accountable for reporting those earnings to the IRS?

Do I have to pay taxes on fantasy sports winnings?

Possibly, yes. The income from fantasy sports is treated just like any other cash prize or gambling win. If your net profit from playing fantasy football is $600 or more, you will need to report your winnings.

How do I report fantasy sports winnings?

Winnings are reported as “other income” on your tax return. The major leagues know to send you Form 1099-MISC, which has all the information you’ll need. They’ll send the same information to the IRS about your net profit, so make sure to report your winnings on your tax return. The IRS will know if you did not.

What should I do if I didn’t get a 1099-MISC?

If you don’t receive Form 1099-MISC from your fantasy sports host site, it does not mean you are free 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 to report them accurately on your tax return.

Are there tax deductions for fantasy sports?

Currently, there are no tax deductions for fantasy league winnings. Before 2018, you could write off the entrance fees under miscellaneous deductions. But the tax laws changed under the Tax Cuts and Jobs Act and got rid of miscellaneous deductions like this one. Learn more about it here.

Can I claim gambling losses for fantasy sports?

The general rule for claiming gambling losses is that you can never deduct more for losses than you report for 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 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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The IRS views winnings from gambling as taxable income, but did you know that you’re allowed to deduct gambling losses, too? While losing money at a casino or the racetrack does not by itself relieve your tax burden, it can reduce taxes owed for your other winnings, ultimately saving you money.

How to know if you can deduct your gambling losses

Gambling loss deductions save you money by reducing your taxable income. But there’s a trick to this—you can’t claim gambling losses that exceed your winnings, as losses are inextricably linked to your winnings for tax purposes. If you have no winnings to claim, you can’t deduct your losses.

As an example, let’s say that in a given year you went gambling twice, winning $6,000 in one instance, but losing $8,000 in another. In this case, you can only deduct $6,000 from that $8,000 loss. The remaining $2,000 in losses can’t be carried forward or written off. Conversely, if you won more than you lost, you’d owe taxes on the difference between your winnings and losses as “other income”—but at least those taxes would be reduced.

(If you’re a full-time, professional gambler the requirements are different: you will report your earnings like they have resulted from a business, as self-employed income).

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Claim Gambling Winnings On Your Taxes Refund

How to claim gambling losses

Deductible gambling losses can result from online casinos, poker games, sports betting, lotteries, prize draws, horse and dog racing, and even your office fantasy sports pool. To report any of these gambling losses, you’ll be required to itemize your deductions. This makes sense if the total of all your itemized deductions exceeds the standard deduction ($12,400 for taxpayers who are single or are filing separately from their spouse). If you claim the standard deduction, you don’t get the opportunity to reduce taxes for winnings owed by deducting gambling losses.

Keep in mind that you must be able to substantiate any losses you’re claiming, which means you’ll need to keep records of your gambling.

Claim Gambling Winnings On Your Taxes Money

Track your winnings and losses

You can’t just say “I lost a bunch of money gambling” to the IRS. They require you to provide records of your winnings and losses to back your claim. Therefore, you should keep track of:

• the date and time of your gambling session
• the type of gambling
• the name and location of the gambling venue
• the people you gambled with
• how much you bet, won and lost

You should also keep credit cards statements, payout slips, receipts, tickets, bank withdrawal records, and statements of actual winnings. Other documentation can include:

Claim Gambling Winnings On Your Taxes Returns

• Form W-2G (typically given or mailed to you by casinos after a big payout)
• Form 5754 (a form for when you’re part of a group that earns money through gambling; you might see one of these if you and your co-workers are cashing in a winning lottery ticket)

Claim Gambling Winnings On Your Taxes Owed

Do you or someone you know need help with a gambling problem? Call the National Problem Gambling Helpline Network (1-800-522-4700).