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Are Fantasy Football Winnings Taxable?

November 07, 2022

Are you participating in a fantasy football league this season? Be mindful of your tax obligations. Let’s explore.

Wondering if the IRS gets a share of your fantasy football winnings? We shed light on your tax obligations here.

Are winnings taxable?

If you win $600 or more playing through sites like FanDuel and DraftKings, you are required to file Form 1099-MISC (or 1099-K if you receive your winnings via PayPal). The form will be sent to you from your league’s organizers.

To determine when a player reaches the $600 level, organizers use the formula:

Prizes won – Entry Fees + Bonuses = Net Profit

1099-K reporting changes

Check out our blog, IRS Releases Major Changes to 1099-K Reporting in 2022 for the details, but essentially Starting in 2022, the threshold decreases to $600, meaning if you receive more than $600 per year (no minimum transaction requirement) through third party peer-to-peer payment apps, you will be taxed on those transactions.

Under previous rules, the IRS required each PSE to send your business a Form 1099-K by January 31st if you received over $20,000 in gross payment volume and over 200 separate payments in a calendar year.

Do you have to report winnings on your tax return?

Yes, all income earned from fantasy football must be reported as “other income” on Schedule 1 or as business income on Schedule C.

Can you deduct fantasy football wins or losses?

If you report income earned as other income on Schedule 1, the IRS considers your fantasy football participation a hobby meaning you cannot deduct any expenses or losses.

You can report your net profit as business income if you’re able to convince the IRS that your fantasy sport is not a hobby. To be considered a business, the IRS wants to know that you engage in this activity regularly and that you treat it as a business activity (aiming to earn a profit). Check out our blog, The Hobby Loss Rule: Does the IRS Consider Your Hobby a Business? For more information about hobbies vs. businesses.

If your income or losses are recognized as business income, you can report your net profit as business income on Schedule C. You can also report net losses, too—and you can use the loss to reduce taxable income from your other jobs or businesses.

Questions on your tax obligations? We can help.

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