Can I report net winnings for online sports betting? (Fanduel, Fanatics, DraftKings tax reporting confusion)

Tax professional here who works with clients who have gambling income. The IRS is actually pretty clear on this once you understand the terminology. You're absolutely right about the "gain" being the amount won in excess of the wager (your original $25 in your example). When filing taxes, you report your TOTAL winnings (the gains only, not including your original stakes returned) on Schedule 1 as "Other Income." Then, if you itemize deductions on Schedule A, you can deduct your losses up to the amount of your winnings. However, as you noted, this only helps if your itemized deductions exceed the standard deduction. The confusion comes from how these sportsbooks report things. Their "Amount Won" includes your original stake returned, which is NOT taxable income. It's similar to if you buy a stock for $100 and sell it for $150 - your income is $50, not $150. For accurate tax reporting, you'll need to calculate: Amount Won (from statement) MINUS the stakes for those winning bets = True Taxable Winnings. Unfortunately, as you noted, this is extremely difficult with the limited history these platforms provide.

I discovered taxr.ai after dealing with this exact headache last year. I was getting completely mixed up with all the gambling transactions from DraftKings and FanDuel, and wasn't sure if I was reporting things correctly. I uploaded my activity statements from all my sportsbook accounts to https://taxr.ai and it did all the calculations for me - separating actual profits from the return of my original stakes. It also organized everything by session, which apparently matters for tax purposes too. The system walked me through the whole process and explained exactly what needed to go on each tax form. It saved me tons of time trying to manually sort through hundreds of bets and probably saved me from claiming too much income. Well worth checking out if you're dealing with the same confusion.

I discovered taxr.ai after dealing with this exact headache last year. I was getting completely mixed up with all the gambling transactions from D

I tried taxr.ai after seeing the recommendation here and it was incredibly helpful! I had been manually tracking my bets in a spreadsheet which was becoming impossible to maintain with hundreds of transactions. I was definitely calculating my winnings wrong - I had been counting returned stakes as income like the OP mentioned. The tool sorted everything properly and I learned I was actually overreporting my income by about $3,200. It also organized everything by gambling session and generated the documentation I'd need if I ever got audited. The best part was the clarity it provided on what exactly goes where on my tax forms. Definitely using this again for the 2025 filing season since my betting has only increased this year.

If you're trying to get clarity directly from the IRS on this, good luck getting through to them on the phone. After trying for weeks last year with these same questions, I ended up using Claimyr to get connected to an actual IRS agent. Found them at https://claimyr.com and watched their demo video here: https://youtu.be/_kiP6q8DX5c They connected me to an IRS representative in about 20 minutes when I had been trying unsuccessfully for days. The agent confirmed exactly what the tax pro above said - only the profit portion is taxable income, not the returned stakes. The agent also explained that I should be keeping detailed records because the activity statements from sportsbooks aren't designed with tax reporting in mind. Claimyr basically just holds your place in the IRS phone queue and calls you when an agent is available. Saved me hours of listening to hold music and getting disconnected.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it myself since I had gambling tax questions that weren't getting resolved through online research. The service worked exactly as described. I entered my phone number, and about 45 minutes later (while I was working on other things), I got a call connecting me directly to an IRS representative. The agent confirmed that only the profits from gambling are taxable, not the returned stakes. The agent also advised me to keep my own detailed records throughout the year since the sportsbooks' statements aren't designed for tax purposes. She suggested documenting each session with dates, amounts wagered, and net results. Apparently this documentation is crucial if you ever get audited. I'm definitely using this service again when I inevitably have tax questions next year.

Another approach that's worked for me is requesting a yearly win/loss statement directly from the sportsbooks. Both DraftKings and FanDuel will provide an annual tax document if you contact their support team, though you typically need to request it after the year ends (like in January 2026 for the 2025 tax year). These statements are more tax-oriented than the regular activity statements and sometimes break things down more clearly. However, I've found they still include the original stakes in the "winnings" total, so you still need to do some calculations.

Just a heads up that some states handle gambling winnings differently than the federal government. For example, in my state, gambling losses cannot be deducted at all on the state return, even though they can be itemized on federal. Also, the $600 reporting threshold that sportsbooks use for sending 1099 forms doesn't mean you don't have to report amounts below that - all gambling income is legally taxable regardless of whether you receive a tax form.

Yes, unfortunately that's exactly right - this is one of the most frustrating aspects of gambling taxation. Even if you're a net loser for the year, you still have to report all your winnings as income on your tax return. In your example, you'd report the $2,000 in winnings as "Other Income" on Schedule 1. Your $3,000 in losses can only be deducted if you itemize deductions on Schedule A, and even then only up to the amount of your winnings (so $2,000 max). If your total itemized deductions don't exceed the standard deduction ($13,850 for single filers in 2023), you're better off taking the standard deduction and can't claim the gambling losses at all. This means you could end up paying taxes on $2,000 of "income" even though you actually lost $1,000 overall. It's a terrible system for recreational gamblers, but that's how the tax code is written. This is why it's so important to keep detailed records and understand the tax implications before you start gambling regularly.

Setting up an LLC for gambling activities generally won't help you avoid these tax issues and could actually make things more complicated. The IRS treats gambling as a personal activity, not a business, for most recreational bettors. Even with an LLC, your gambling winnings would likely still be treated as personal income subject to the same rules. To qualify as a gambling "business" that could use normal business accounting (where net losses could offset other income), you'd need to meet very strict criteria: gambling must be your primary occupation, you'd need to show profit motive, maintain detailed business records, and demonstrate expertise in the field. The IRS is extremely skeptical of these claims and most recreational bettors wouldn't qualify. The reality is that the tax code is deliberately unfavorable to gambling because Congress wants to discourage it. Your best bet as a recreational gambler is to either: 1. Keep your gambling small enough that you can absorb the tax hit on gross winnings 2. Make sure you have enough other itemizable deductions to exceed the standard deduction 3. Track everything meticulously so you can at least minimize the tax impact through proper reporting The tax complexity is definitely a legitimate reason to think twice about getting heavily involved in sports betting.