Daily fantasy sports is an entertaining endeavor that can also result in a great payday. The bad news is this payday will be like almost every other payday you have ever had: the government will want its share.
Editors note: We are not tax professionals, and this is not tax advice. If you have DFS winnings, you should speak with a qualified CPA for advice. Today’s post is more of a nuts-and-bolts explanation of how I personally calculated my net winnings and filled out the various tax forms associated with online gaming winnings.
In most states, daily fantasy winnings of any amount are subject to federal income tax and may also be subject to state income tax. If you win $2,000 or more in a year, your DFS site should send you a 1099-Misc tax form. However, even if you don’t receive a tax form, the law requires you to report all taxable winnings.
Calculating DFS Profit
Each site can have a different way of calculating what they see as your overall profit, but almost every website will have the same formula. You need to take your prize winnings and then subtract the overall entry prices for all of your contests. After finding that total, add the amount of rewards and other miscellaneous things that a DFS site may provide you.
When I say “other miscellaneous things,” this is usually something like rewards given to you by a site or a deposit bonus of some sort. An example of this is that if you play DFS at DraftKings you will earn crowns for every dollar you play. If you make 55,000 crowns this year, that is an extra $100 you have earned.
The equation for this would simply be:
Total Winnings – Total Entry Fees + Any Bonus Earned = Overall Profit
For example, let’s say I won $10,285 in total winnings while entering $3,948 and then earning $400 in bonuses. I would have an overall profit of $6,737, and that is (probably) the money that I would be required to pay daily fantasy sports taxes on. Caveat: annual profit does not necessarily equal taxable income because federal rules limit loss deductions.
How Can I Find My DFS Earnings?
There are a few ways to actually determine these numbers. You can go to most DFS sites and download your contest history. Once you download your contest history into a CSV, you can find multiple websites that will allow you to analyze your overall DFS success.
These programs are a great way to determine how you play at your best in DFS, but they are also good at providing you the raw numbers that you have won over a given time period.
The other simple way to find this is by determining these four numbers: Total $’s Withdrawn, Account Balance at Year End, Total $’s Deposited, and Beginning of Year Account Balance.
If you can determine these four numbers, you just need to plug them into this equation:
Withdrawn + Balance at Year End – Deposited – Beginning of Year Balance = Overall Profit.
For example, if I started with $1,000, deposited $2,000, withdrew $9,000 and ended with $2,000. I would have an overall profit of $8,000.
Other DFS Tax Forms
The only other things you should be presented with are a W9 and a 1099-K form.
A W-9 form is what you would fill out for any DFS company that you may have to pay taxes from. What I mean is that, for example, FanDuel DFS may need you to fill out a W-9 form with some basic information so they can potentially send you a 1099-Misc form later on in the process if need be.
This is a very simple form and should be rather self-explanatory while filling it out. Filling out one of these forms does not determine whether you owe tax, but it does provide the operator with your taxpayer information.
A 1099-K form is not something that you will likely have to deal with as it is for using a service like PayPal an excessive amount. The qualifications you need to meet to fill out this form are as follows: you must make over 200 transactions through the platform to the same vendor, and you must transfer over $20,000.
If you do meet these criteria, you will just be required to fill out the 1099-K form, and your payment processor will submit it to the IRS.
How To Report DFS Winnings On Taxes
There are two main ways I would consider when trying to figure out how to report your DFS results on your taxes.
The most common way to attack this is to report the income you have earned as “other income” on your form 1040. The other way is to report your DFS results as business income on a Schedule C.
Other Income Approach
Recreational players generally report DFS winnings as other income on Schedule 1 of Form 1040. Under the federal wagering-loss rules (in place since 2026), players who itemize deductions on Schedule A can deduct 90% of their eligible losses, but no more than their winnings for the year. Alternatively, if you take the standard deduction, you cannot deduct your losses.
For example, if you end the tax year with $10,000 in winnings and $10,000 in eligible losses, you’d only be allowed a $9,000 loss deduction. That would leave $1,000 in winnings not offset, even though you broke even.
Business Income Approach
If you DFS activity qualifies as a business, you’ll generally report it on Schedule C. However, qualifying depends on the facts of the activity, not simply choosing business treatment when filing.
It’s also worth noting that business status does not remove the federal wagering-loss limits. Eligible losses and expenses are still subject to the 90% limit and the cap at wagering winnings. You also can’t use losses to offset wages or unrelated business income.
IRS To Tax DFS As Wagering And Implement 0.25% Tax
10/27/2020: Update from the editor
The IRS is pushing forward with plans to treat DFS entries as wagers and implement a federal 0.25% excise tax on all entry fees, similar to how it treats sports betting. If implemented, the change will not directly affect users, but it will impact fantasy operators who are likely to pass the cost on to consumers.
A September 2020 memo issued by the IRS in response to a query from an attorney concludes:
The amount paid by a daily fantasy sports player to participate in a daily fantasy sports contest constitutes an amount paid for a wagering transaction under § 165(d).
Although many states treat daily fantasy sports as contests of skill, the IRS intends to treat them as wagering. The IRS further explains its rationale:
DFS transactions meet the definition of wager as interpreted by the Tax Court and State courts because there is an uncertain event (such as the live performance of individual players), winnings if the event resolves in participant’s favor, and consideration is lost if the event does not resolve in participant’s favor. Each DFS transaction is a pay to play competition with predetermined winnings for a certain number of participants. The outcome of the competition turns on the overall statistical performance of live professional players assembled into the fantasy team. The winning participant receives a return of his or her initial bet along with wagering gains, while the losing participant walks away empty handed. This is consistent with the courts’ interpretation of the term “wager.”
The IRS has not implemented a federal excise tax as of this update, but it seems intent on doing so. We will update this post as we learn more.
Ryan Knuppel is a veteran of the sports betting and daily fantasy sports industry, and an all-around sports fan. Owner of Knup Solutions sports content agency, Founder Sports 2.0 Network, Ryan is a sports business and betting advocate.