The Fantasy Sports Trade Association (FSTA.org) estimates that approximately 19% of Americans play fantasy sports.

Background:

An IRS memo (#202042015) states that Daily Fantasy Sports (DFS) income should be treated the same as gambling income on your tax return. This complicates matters because now there are two types of fantasy sports, each with their own tax treatment:

• DFS: Treated as gambling for tax purposes.

• Most other Fantasy Sports: Treated as a hobby income for tax purposes.

Let's first define what DFS is (and isn't), and then look at how to report each type of fantasy sports income.

What is Daily Fantasy Sports?

The DFS market in the US is dominated by two websites, Draft Kings & Fan Duel. If you are spending and/or making real money on these (or similar) sites then you are likely playing DFS and treat the wins and losses as gambling for tax purposes.

What isn't Daily Fantasy Sports?

There are plenty of ways to spend and make money on fantasy sports that are not DFS. If you are NOT wagering on Draft Kings, Fan Duel, or similar websites then you are likely engaging in a hobby for tax purposes. The most common example would be Fantasy Football leagues played with friends, family, or co-workers. Another example would be 'pick-em' pools/leagues where you select the winner of sporting events (typically with friends, family, or co-workers).

How to report DFS income and wagers:

Report DFS income the same way you do all other gambling income/losses from casinos and race tracks:

• Report all gross winnings as "other income" on Schedule 1

• Report losses on Schedule A (up to, but not exceeding the amount of the winnings reported on Schedule 1)

Important note: As always, take careful records of all wagers and wins. Ideally you would have a log-book of each "session" showing how much was wagered in total and the amount of the winnings (if any) from each activity separately.

Report non-DFS fantasy sports income as a "hobby":

If it's not DFS, simply report the grand total won as "hobby income" on Schedule 1. Do NOT report how much you spent to participate in the contest on Schedule A (because hobby expenses are no longer deductible, starting with tax-year 2018).

Are you a professional DFS player and/or gambler?

If you engage in fantasy sports (or gambling) full time (for a living) you can deduct your ordinary and necessary expenses (including wagers) as a business on Schedule C. However, your deductions cannot be in excess of income.