How Much Tax Will You Owe on FanDuel Winnings in New York?

As an avid FanDuel user and gaming industry analyst, one question I get asked constantly is: "How much tax do you pay on winnings earned on the platform if you‘re a New York resident?"

I‘m going to comprehensively answer that question in this post as someone passionately immersed in all things daily fantasy sports (DFS).

Straight up: If you win money playing DFS contests on FanDuel while living in New York, you can expect to pay federal taxes of 24% and state taxes of 8.82% on those winnings.

Let‘s use some examples to illustrate:

• If you win $1,000 on FanDuel, you‘ll owe $240 (24%) in federal tax and $88 (8.82%) in NY state tax, netting you $672.
• For a $10,000 prize, it would be $2,400 federal and $882 NY state, leaving you with $6,718.
• On a dream $100,000 score, roughly $24,000 goes to the IRS and $8,820 to NY. You keep $67,180.

As you can see, those tax rates put a real dent in your winnings. New York‘s top state tax bracket kicks in at a very low level for DFS prizes.

Now let‘s dive deeper on key taxation issues…

Tax Reporting Requirements from FanDuel

FanDuel must report players‘ winnings over $600 in a calendar year to the IRS via Form 1099-MISC. So don‘t assume you can dodge declaring that income if you have a big year on the platform.

As a high-volume player, I have firsthand experience getting these 1099s from FanDuel and pointing out any discrepancies. I advise anyone winning over the $600 threshold to be vigilant in tracking prizes against what FanDuel reports to the tax agencies.

Can You Write Off Losses Against Winnings?

If you itemize deductions on your federal return, gambling losses can be written off against gambling winnings in the "Other Itemized Deductions" section, up to the amount you won.

Example:

• DFS Winnings in 2022 = $10,000
• DFS Losses in 2022 = $15,000
• Your loss deduction would max out at $10,000, fully negating federal tax but with no extra benefit beyond that.

Since New York only allows loss deductions up to the winnings amount for state tax purposes, you get zero state deduction for losses above your prizes. So unfortunately no double dipping!

As a DFS expert, I meticulously track my records within FanDuel so I have proof if I need to reconcile discrepancies on a tax return down the road.

Quarterly Estimated Taxes

If you have variability in your FanDuel winnings and already owe federal taxes beyond payroll withholding, making quarterly estimated payments is probably a smart move. The IRS can assess penalties if you don‘t pay enough tax through the year via other means.

As a gaming analyst, I think it‘s generally wise to be conservative on estimates for big DFS prize hauls. Paying a bit extra on quarterly payments just gives you a refund cushion.

Impacts on Capital Gains Taxes

An underreported tax nuance for degenerate DFS players like me who win large jackpots is capital gains thresholds.

If I have $100K in long-term stock gains taxed at 15%, tacking on a separate $100K FanDuel score could bump part of my gains into the 20% bracket via the higher qualified dividends/LTCG rates.

It pays to model out scenarios of unusually big DFS prize years juxtaposed against other income. The tax complexity gets intense!

Alternative Minimum Tax Situations

For high income earners also banking big DFS payouts, you need to keep AMT liability on your radar. Gambling winnings count toward AMT income calculations. So a banner FanDuel year could inadvertently expose more of your ordinary income to the unforgiving AMT rate around 28%.

Again, it‘s critical to crunch the numbers with your accountant. Look beyond just the standalone FanDuel prizes.

Tactics for Reducing Your Tax Burden

With Uncle Sam taking a colossal bite out of large DFS payouts, are there any creative ways to lighten the damage? Enter my specialty as The DFS Tax Guy.

A few possibilities:

• Max out pre-tax 401k, FSA, and HSA accounts to lower AGI
• Harvest capital losses to offset gains
• Accelerate business deductions like equipment purchases
• Contribute to tax-deductible IRA if eligible
• Claim children/dependents for added credits/exemptions

Of course, consult a qualified tax advisor before implementing strategies. But some outside-the-box thinking can really add up savings-wise.

Overall, I hope this guide provides loads of value no matter your experience level with FanDuel, DraftKings, or other DFS operators. Let me know if you have any other tax-related questions!