Flag On the Play! Fantasy Sports Have Real Penalties.
It is Fall. That time of year when sports are in full swing! Who can ignore the cheers, shouting and yelling at the television, and bragging and ragging on social media amongst fans. Not to mention all the chatter floating around about “fantasy teams”.
Fantasy sports is BIG business that involves drafting team players and strategizing for a chance to win prizes and cash. Players use avatars of real sports professionals to play fictitious games. Whether using a legitimate fantasy sports provider to play the game (i.e FanDuel, DraftKings), participating in an office pool or amongst friends, the game may come at a price when filing taxes.
While fantasy sports are not considered gambling, the winnings are considered income and should be reported on Form 1040 under Other/Miscellaneous Income. Winnings include cash as well as non-cash items such as prizes, gift cards and trips. If the winnings are $600 or more, players who used a fantasy sports provider will receive a Form 1099-Misc. If you participate in a more casual fantasy league you will not receive a Form 1099-Misc. Nonetheless, you should report your winnings as other/miscellaneous income. If winnings are less than $600 it is still a good idea to keep track of that income.
If using a fantasy team provider, you may be able to deduct expenses such as entrance fees by itemizing. You can only deduct losses up to the amount of the total winnings that you report as income. Click the following link for more information on itemized deductions.
Next time you get your friends together to draft a team where the winner takes all, don’t forget about the tax implications.