Fantasy sports teams are a great way to channel your inner big-league team owner. After all, you can draft players, create and manage rosters, and compete against other fantasy teams throughout the season. What’s not to love about that?
Fantasy sports are also a way to pick up some extra money, and the IRS is knows this. Here’s what you need to know about fantasy sports leagues and the IRS.
Will My Winnings Be Taxed?
While the IRS has no specific tax code regarding fantasy sports winnings. At the same time, you’re required to report all income, including cash winnings if they exceed $600.00 in a single tax year.
Can I Write Off My Fantasy Sports Expenses as Losses?
You could potentially write off your expenses as losses if you also win money in the same year. This rule only applies if you win prizes or cash, and the IRS will allow you to write off losses only to the extent of your winnings.
Reporting Your Winnings
Since the IRS doesn’t classify fantasy sports as gambling, any cash and prizes worth over $600.00 will need to be reported as “miscellaneous income” on your tax return. Take the total from the 1099-MISC form issued by the fantasy league, and enter that amount on your 1040 or 1040A tax form. Even if you don’t get a 1099-MISC in the mail, you are required to report earnings over $600.00.
Read the program’s terms and conditions carefully when signing up: there should be a provision stating the program will issue a 1099-MISC on all winnings over the $600 threshold.
If you enjoy fantasy sports, keeping making those picks! One way to avoid potential tax troubles from unreported income is to keep careful records of your winnings throughout the year. If they exceed $600.00, be sure to include them on your tax return to avoid future tax troubles.
Fantasy sports leagues are a popular hobby for all types of sports fans. Where else will you get the chance to draft and manage your team, and to have that team play against others in the league with some money on the line?
Keep careful records of your cash and prize winnings, and report them at the end of the year on your tax form, even if the fantasy sports program didn’t issue a 1099-MISC. By doing so, you’ll avoid future tax problems related to unreported income.