You cannot avoid paying taxes on FanDuel winnings, but you can reduce what you owe

The Internal Revenue Service treats money you win from daily fantasy sports on FanDuel as taxable income. There is no legal way to avoid reporting it. However, you can lower your tax bill by deducting your losses — the money you spent on entries that did not win — against your winnings. This is the only legitimate reduction available to most people who play.

FanDuel reports your winnings to the IRS on Form 1099-NEC if you win more than $600 in a calendar year. The company also sends you a copy. If you receive this form, the IRS already knows about your winnings, and you must report them on your tax return. Failing to do so triggers an audit notice.

The key to reducing your tax liability is keeping records of every entry fee you paid, whether it won or lost. The IRS allows you to deduct gambling losses, but only if you itemize deductions on your return and only up to the amount of your winnings.

Key Takeaways

  • FanDuel reports winnings over $600 to the IRS on Form 1099-NEC, so you must report all winnings on your tax return regardless of the amount.
  • You can deduct your losses — every entry fee you paid — but only up to the total amount you won that year.
  • To claim losses, you must itemize deductions on your tax return rather than take the standard deduction, and you must keep detailed records of all entries.
  • Losses are deducted as miscellaneous itemized deductions, which means they reduce your taxable income only if your total itemized deductions exceed the standard deduction.
  • Winnings are reported as "other income" on Form 1040, and losses are reported on Schedule A if you itemize.

How FanDuel reports your winnings to the IRS

When you cash out winnings from FanDuel, the company tracks the amount. If your total winnings reach $600 or more in a single calendar year, FanDuel issues a Form 1099-NEC and sends copies to both you and the IRS. This form lists your winnings under Box 1 (Nonemployee Compensation), though the label is misleading — it is the standard form the IRS uses for miscellaneous income.

The $600 threshold applies per calendar year, not per contest or per withdrawal. If you win $400 in January and $300 in December, FanDuel will issue a 1099-NEC because your total is $700. If you win $500 total across the entire year, you will not receive a 1099-NEC, but you still owe tax on those winnings.

FanDuel does not withhold taxes from your winnings the way an employer withholds from a paycheck. You receive the full amount and are responsible for reporting it and paying the tax when you file your return.

Deducting losses against your winnings

The IRS allows you to deduct gambling losses, but with strict limits. You can deduct losses only up to the amount of your winnings in the same year. If you won $2,000 and lost $3,000 in entry fees, you can deduct only $2,000 in losses, reducing your taxable winnings to zero. The remaining $1,000 in losses cannot be carried forward to the next year or used to offset other income.

To claim losses, you must itemize deductions on Schedule A of Form 1040 rather than take the standard deduction. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your total itemized deductions — including gambling losses, mortgage interest, state and local taxes, and charitable donations — do not exceed the standard deduction, you will not benefit from deducting your losses.

Gambling losses are reported on Schedule A as miscellaneous itemized deductions. You must list them separately and keep documentation of every entry fee you paid.

Records you need to keep for the IRS

The IRS does not require you to submit receipts with your tax return, but you must keep them for at least three years in case of an audit. For FanDuel, this means saving records of every contest entry, the date, the entry fee, and the result.

FanDuel provides a transaction history in your account. You can read or screenshot this history showing all entries and their outcomes. Include the contest name, entry amount, and whether you won or lost. If you play multiple contests per day, the history will show each one separately.

If you cannot reconstruct your losses from FanDuel's records alone, keep bank or credit card statements showing deposits to your FanDuel account. These show the total money you put in, though they do not break down individual contests. Combine these with your account history for the most complete record.

When itemizing deductions makes sense

Itemizing is worth doing only if your total itemized deductions exceed the standard deduction for your filing status. If you own a home with a mortgage, you likely itemize because mortgage interest alone often exceeds the standard deduction. If you live in a high-tax state and pay significant state income tax or property tax, itemizing may also benefit you.

If you rent, have no mortgage, and live in a low-tax state, your itemized deductions may fall short of the standard deduction even with gambling losses included. In that case, taking the standard deduction saves you more money than itemizing and deducting your losses.

Use the IRS worksheet or a tax software calculator to compare your itemized deductions against the standard deduction before deciding which route to take. Some tax software will calculate both scenarios automatically.

What happens if you do not report FanDuel winnings

If FanDuel issued you a Form 1099-NEC, the IRS received a copy. The IRS matches 1099 forms to tax returns and flags returns that do not report the income shown on the form. An automated notice will arrive asking you to explain the discrepancy or pay the tax owed plus interest and penalties.

If you won less than $600 and did not receive a 1099-NEC, the IRS may not know about your winnings unless you are audited for other reasons. However, not reporting income is tax evasion, which is illegal. The IRS can assess penalties of 20 percent for accuracy-related issues or 75 percent for fraud if the underreporting is deemed intentional.

Interest accrues on unpaid taxes from the original due date of your return. If you owe $1,000 in taxes and penalties and do not pay for two years, the total amount due will be significantly higher.

State taxes on FanDuel winnings

Most states tax gambling winnings as ordinary income. Your state tax rate applies to your FanDuel winnings the same way it applies to wages or other income. Some states have no income tax, including Florida, Texas, and Nevada, so residents of those states owe federal tax but not state tax on their winnings.

A few states impose a separate tax on gambling winnings in addition to income tax. New York, for example, taxes casino winnings at a rate higher than ordinary income, though daily fantasy sports winnings are typically taxed as regular income. Check your state's tax authority website or speak with a tax professional to confirm your state's rules.

If you live in one state but play on FanDuel while living in another state temporarily, the state where you are a resident when you file your tax return is the state that taxes your winnings. Residency is determined by where you maintain a permanent home and where you spend most of your time.

Frequently Asked Questions

Do I have to report FanDuel winnings if I won less than $600?

Yes. The $600 threshold only determines whether FanDuel sends you a 1099-NEC form. You owe tax on all gambling winnings, regardless of the amount. If you won $200, you must report it on your tax return.

Can I deduct losses from previous years?

No. Gambling losses can only be deducted in the year they occurred. If you lost $1,000 in 2023 and won $500 in 2024, you cannot use the 2023 losses to reduce your 2024 winnings. Each year stands alone.

What if I lost more money than I won?

You can deduct losses only up to your winnings. If you won $1,000 and lost $3,000, you deduct $1,000 in losses, reducing your taxable winnings to zero. The extra $2,000 in losses disappears and cannot be used to reduce other income or carried to the next year.

Does FanDuel withhold taxes from my winnings?

No. FanDuel does not withhold federal or state taxes. You receive the full amount and are responsible for paying tax when you file your return. If you expect to owe a large amount, you may want to set aside money throughout the year or make estimated tax payments to avoid a big bill at tax time.

What tax form do I use to report FanDuel winnings?

Report winnings on Form 1040, line 8 (Other Income). If you itemize deductions and want to deduct losses, list them on Schedule A. If you receive a 1099-NEC from FanDuel, attach a copy to your return.