DraftKings and FanDuel Tax Guide for NJ: How to Report Your Sports Betting Income in 2026

Quick Answer: If you placed sports bets through DraftKings, FanDuel, or any other NJ-licensed sportsbook in 2025, your winnings are taxable income. Report total winnings on federal Form 1040 (Schedule 1, Line 8b) and deduct losses on Schedule A if you itemize. On the NJ-1040, report net gambling income (wins minus losses, not below zero). For 2026 activity happening now, the federal loss deduction is capped at 90% under the OBBBA - but NJ still permits documented same-year losses to offset winnings within the applicable gambling-income category, with a zero floor (no cross-category offset, no carryforward).

🚨 The 2026 OBBBA change every NJ sports bettor needs to know:

Federal gambling losses are now capped at 90% of losses (IRC §165(d) as amended by OBBBA, effective Jan 1, 2026). A break-even bettor with $20,000 in wins and $20,000 in losses now owes federal tax on $2,000 of phantom income. NJ did not adopt the cap - on the NJ-1040, documented same-year losses still offset winnings within the applicable gambling-income category (zero floor; no cross-category offset, no carryforward), so the same activity produces $0 NJ tax.

W-2G threshold note: For a 2026 sportsbook or other parimutuel wager, payment/winnings must be $2,000 or more and at least 300 times the wager. The 2025 payment floor was $600; the 300-times payment-to-wager test is unchanged. Wager subtraction instead applies to the separate regular-withholding proceeds test. Slots and bingo use a $2,000 payment threshold without wager reduction, and keno uses $2,000 after wager reduction. Most casual sports bets do not meet the 300-times test - but every dollar of winnings is still taxable regardless of form issuance.

In This Article

1. The 2026 OBBBA Changes That Affect Every NJ Sports Bettor
2. Step 1: Download Your Year-End Tax Statements
3. Step 2: Understand What Forms You Might Receive (W-2G vs. 1099-MISC)
4. Step 3: Calculate Your Numbers
5. Step 4: Report on Your Federal Return
6. Step 5: Report on Your NJ-1040
7. Worked Examples: Federal vs. NJ Tax in 2026
8. What Are the Most Common Tax Situations for NJ Sports Bettors?
9. What Are the Best Practices for Keeping Sports Betting Records for Tax Purposes?
10. Where Do I Find My Year-End Tax Statements from DraftKings and FanDuel?
11. What If I Didn't Receive a Form I Expected?
12. When You Should Work with a CPA
13. Key Takeaway
14. Frequently Asked Questions
15. Ready to File With Confidence?

The 2026 OBBBA Changes That Affect Every NJ Sports Bettor

The One Big Beautiful Bill Act (P.L. 119-21, signed July 2025) made two structural changes to gambling tax law effective January 1, 2026:

Practical example: A $5 parlay returns a $2,505 gross payment, so its net proceeds are $2,500. A W-2G is issued because the gross payment clears the 2026 $2,000 floor and the net-proceeds ratio is $2,500 / $5 = 500x. Regular 24% federal withholding is not triggered because net proceeds do not exceed $5,000. The $2,500 net win is still fully taxable and must be reported on Schedule 1, Line 8b. Withholding and reporting are not the same thing.

What You'll Need

• Year-end tax statements from every sportsbook you used
• Any W-2G forms received
• Your own gambling log or records (dates, amounts, platforms)
• Prior-year tax return (for reference)
• Deposit/withdrawal records from gambling accounts

If you placed sports bets through DraftKings, FanDuel, BetMGM, Caesars, Fanatics (formerly PointsBet), bet365, or any other NJ-licensed sportsbook in 2025, your winnings are taxable income. Both the IRS and the New Jersey Division of Taxation expect you to report it.

The good news: reporting sports betting income is straightforward once you understand what the sportsbooks send you, what the IRS and NJ expect, and where the numbers go on your returns.

Greg Monaco is a NJ-licensed CPA who prepares tax returns for sports bettors as part of the tax preparation services. Here's his step-by-step guide to getting it right.

Step 1: Download Your Year-End Tax Statements

Every major NJ sportsbook provides a year-end tax summary or activity statement. These documents show your total wagers, total winnings, total losses, and net results for the calendar year.

Log into each sportsbook you used in 2025 and download these statements. Check the "Tax Information," "Account," or "Documents" section of your account settings.

If you used multiple platforms - which most NJ sports bettors do - you need statements from all of them. Your tax return needs to account for your total activity across every platform.

Common platforms for NJ bettors include DraftKings, FanDuel, BetMGM, Caesars Sportsbook, Fanatics (formerly PointsBet), and bet365. Each has a slightly different process for accessing tax documents, but all are required to make them available.

Step 2: Understand What Forms You Might Receive

Form W-2G

Sportsbooks issue a W-2G for a single qualifying bet only when two reporting tests are met. Payment/winnings must meet the dollar floor: $600 for 2025 or $2,000 for 2026. That same payment/winnings amount must be at least 300 times the wager. Do not subtract the wager for either reporting test. Most casual bets fail the second test, which primarily reaches longshot parlays and prop bets.

Federal withholding of 24% generally applies to sports and parimutuel wagers when winnings minus the wager exceed $5,000 and the payment/winnings are at least 300 times the wager. The payer withholds 24% of the proceeds (winnings minus wager). If federal tax was withheld, it appears on the W-2G and is credited on your tax return.

For 2026, the W-2G reporting threshold structure is: slots/bingo payments of $2,000 or more without wager reduction; keno winnings of $2,000 or more after wager reduction; sports betting and other parimutuel payment/winnings of $2,000 or more and at least 300 times the wager; and poker-tournament winnings of $2,000 or more, net of buy-in (the prior poker rule was more than $5,000 net through 2025). Every dollar of gambling winnings remains reportable whether or not a form is issued.

Other forms you might receive

You may receive a W-2G for certain individual wager wins. Some platforms may also issue 1099 forms for promotional prizes or other non-wager payouts. A gambling withdrawal or transfer of your own balance does not itself trigger Form 1099-K; payment apps issue that form for covered goods-or-services settlement transactions when applicable. Regardless of which forms you receive - or don't - you must report all gambling winnings.

No form doesn't mean no tax. Many sports bettors don't receive any tax forms because their individual wins don't hit the reporting thresholds. That doesn't make the income nontaxable. The IRS requires you to report all gambling winnings regardless of whether you received a form. (IRS Topic 419 (opens in a new tab))

Step 3: Calculate Your Numbers

For federal purposes, you need two numbers: total gambling winnings for the year and total gambling losses for the year.

Total winnings means every winning bet - every single one, not just the ones reported on W-2Gs. Your sportsbook year-end statements will show this.

Total losses means every losing bet. Again, your sportsbook statements are the primary source.

If you used multiple sportsbooks, add up the totals from all platforms.

For NJ purposes, you need the net: total winnings minus total losses. If the result is positive, that's your NJ net gambling income. If the result is negative, report zero - NJ doesn't allow net gambling losses. (NJ Division of Taxation - Gambling Winnings (opens in a new tab))

Step 4: Report on Your Federal Return

Report total winnings on Form 1040, Schedule 1, Line 8b ("Gambling income"). This is your gross winnings from all gambling activity.

Deduct losses on Schedule A, Line 16 ("Other itemized deductions - gambling losses"). This requires you to itemize deductions. Your loss deduction cannot exceed your total winnings.

Key distinction between 2025 and 2026: For 2025 returns, you can deduct 100% of losses up to your winnings. For 2026 activity (filed in 2027), the deduction is capped at 90% of losses under the OBBBA's amendment to Section 165(d). Read the full explanation of the 90% cap

If you take the standard deduction ($15,750 single / $31,500 MFJ for tax year 2025) instead of itemizing, you cannot deduct any gambling losses federally. Your gross winnings are fully taxable. This is where the SALT cap increase to $40,000 for 2025 and $40,400 for 2026 becomes relevant for NJ residents - if the higher SALT cap pushes your itemized deductions past the standard deduction threshold, you benefit from itemizing and can claim gambling losses too.

If you have high-volume activity, attach a supporting statement to your return summarizing total winnings and total losses by platform. This preempts IRS questions and aligns with the NJ supporting statement requirement (making both returns consistent).

Step 5: Report on Your NJ-1040

NJ handles gambling differently than the federal return. Report net gambling income (winnings minus losses, not below zero) on the NJ-1040 under "Net Gambling Winnings."

If your net is positive, you owe NJ income tax on that amount at your marginal rate (1.4% to 10.75%).

NJ difference for 2026: While the federal government now caps loss deductions at 90%, NJ did not adopt the cap - documented same-year losses still offset winnings within the applicable gambling-income category on the NJ-1040, with a zero floor. A break-even gambler may owe federal tax on phantom income while the same activity nets to zero within the NJ category.

If you report net gambling winnings, attach a supporting statement showing total winnings and total losses. This is required by the NJ Division of Taxation. (NJ Treasury - TB-20(R) (opens in a new tab))

Any NJ withholding from sportsbooks (3%, keyed to federal regular withholding under IRC §3402(q) rather than W-2G reporting) is credited against your NJ tax liability. Report these on the NJ-1040 as tax payments.

Worked Examples: Federal vs. NJ Tax in 2026

Illustrative scenarios - not complete-return results. The scenarios below are hypothetical illustrations computed only from the stated facts at an assumed marginal bracket. Each displayed tax line is an illustrative gambling-income or estimated marginal-rate tax component; bracket placement, other income, deductions, credits, and withholding are assumed rather than established, so no line is a complete-return, refund, or liability result.

Scenario A: Casual Bettor, Profitable Year, Standard Deduction

Facts: NJ resident wins $8,000 on FanDuel Sportsbook, loses $3,000, and receives one W-2G for a qualifying parlay with a $2,400 payment that is at least 300 times the wager. Takes federal standard deduction. 22% bracket.

Takeaway: Standard-deduction filers get NO federal loss deduction at all. NJ lets the same bettor net $3,000 of losses regardless of standard vs. itemized treatment - this is the NJ structural advantage that often goes unused.

Scenario B: Break-Even Bettor (The OBBBA Phantom Income Trap)

Facts: NJ resident wins $20,000 on DraftKings, loses $20,000 across all sportsbooks in 2026. Itemizes federally. 22% bracket.

This is the headline 2026 conversation. A bettor who broke even economically still owes federal tax on $2,000 of phantom income. NJ avoids this entirely. Professional gambler status (Schedule C) does NOT eliminate the 90% cap.

Scenario C: Net-Loss Bettor on the Standard Deduction

Facts: NJ resident wins $5,000 on FanDuel, loses $8,000. Takes federal standard deduction.

The trap: Bettors assume they owe nothing because they lost overall. Federal tax is owed on the gross winnings unless they itemize. Switching to itemized (if SALT cap + mortgage interest pushes total above standard deduction) is the only relief.

Scenario D: DFS-Only Player (1099-MISC, Not W-2G)

Facts: NJ resident plays DraftKings Pick6 ($2,200 winnings, $1,500 entry fees = $700 net) and FanDuel DFS ($1,200 winnings, $1,100 entry fees = $100 net).

DFS uses NET annual profit (winnings minus entry fees), unlike sportsbook W-2Gs which trigger on individual qualifying bets. Box 3 "Other Income" - not Box 1 wages.

Scenario E: Large-Win Bettor With W-2G and Federal Withholding

Facts: NJ resident receives $6,500 of net proceeds on a qualifying DraftKings parlay; those net proceeds exceed $5,000 and equal 400 times the wager. DraftKings withholds 24% federal ($1,560) and 3% NJ ($195). Annual gambling: $12,000 wins, $7,000 losses. Itemizes federally.

Withholding is a credit, not a separate tax. Both the W-2G amount AND the rest of your year's winnings get reported.

What Are the Most Common Tax Situations for NJ Sports Bettors?

Free Bets and Bonus Credits

Tax treatment of promotional credits can be confusing. The conservative and generally recommended position is that the full payout from a bonus bet counts as gambling income, since you had no cost basis in the promotional credit. For example, a $200 bonus bet that pays $600 is most safely reported as $600 in gambling winnings. Some bettors argue that the promotional value should offset the winnings, but the safer approach - and the one that avoids IRS disputes - is to report the full payout and discuss any alternative positions with a CPA.

This catches many bettors off guard, especially those who receive large sign-up bonuses during football season or March Madness promotions.

Parlays and Same-Game Parlays

A parlay that wins is taxable on the net gain - payout minus your wager. If you bet $50 on a six-leg parlay and win $8,000, your gambling income from that bet is $7,950.

Because longshot parlays can produce payments of at least 300 times the wager, they are more likely to meet the W-2G multiple test. The separate payment floor must also be met. When both tests are met, the IRS receives the form.

Cash-Out and Early Settlement

If you use the "cash out" feature to settle a bet early at a reduced payout, that's a completed bet. The cash-out amount minus your original wager is your gain (or loss) on that bet.

Betting Across Multiple States

If you travel and place bets through sportsbooks licensed in other states - say, placing bets in Pennsylvania or New York while visiting - those winnings may be taxable in the state where you placed the bet. As a NJ resident, you'll also report the income on your NJ-1040 but can claim a credit for taxes paid to the other state.

What Are the Best Practices for Keeping Sports Betting Records for Tax Purposes?

The IRS recommends maintaining a contemporaneous gambling log - meaning you record activity as it happens, not from memory months later. For sports bettors, the sportsbook platforms do most of this work for you, but you should still maintain your own records. (IRS Publication 529 (opens in a new tab))

Download year-end statements from every platform before they potentially expire or become inaccessible. Keep a spreadsheet or log that consolidates activity across all platforms. Save screenshots or exports of account activity. Track free bets and bonuses separately since they have a zero cost basis. Note any bets placed while physically in a different state for multi-state filing purposes.

If you're audited, the IRS will want to see documentation that supports the losses you claimed. Having organized records makes an audit dramatically easier.

Where Do I Find My Year-End Tax Statements from DraftKings and FanDuel?

Each platform has a different process. Here's a general guide:

DraftKings: Log in, go to Account, then Tax Information, and download your Year-End Summary. DraftKings typically makes these available in late January.

FanDuel: Log in, go to Account, then Transaction History or Tax Information. FanDuel provides a year-end summary and any applicable W-2G or 1099 forms.

BetMGM: Log in, go to My Account, then Account Statements, then Tax Documents. BetMGM provides annual summaries.

Caesars: Log in, go to Account, then Tax Forms or Tax Information. Caesars provides year-end activity summaries.

If you can't find your tax documents, contact the sportsbook's support. They are required to provide this information.

What If I Didn't Receive a Form I Expected?

Step 1: Check the right place. Most users miss tax forms because they look in account history rather than the dedicated Financial Center (DraftKings) or Tax Center (FanDuel). On DraftKings mobile, tap profile photo → Download Tax Documents → complete 2FA → select year. On FanDuel, account icon → Tax Center.

Step 2: Verify both reporting tests. For an individual sportsbook wager, payment/winnings must be at least $2,000 for 2026 ($600 for 2025) and at least 300 times the wager. The wager is not subtracted for the 300-times reporting test. A $1,800 payment fails the 2026 dollar floor regardless of its ratio. A 1099-MISC for DFS is only issued when annual NET profit meets the reporting threshold ($600 for 2025; $2,000 starting 2026). Below threshold = no form, but income is still taxable.

Step 3: Request manually if you believe you qualify. Email the platform's tax support (not general customer service) and request your "Annual Tax Document" or "Annual Win/Loss Statement for tax purposes." Always also request your full transaction history - it serves as documentation even when no formal form was issued.

Step 4: Don't wait to file. All gambling winnings are taxable regardless of whether a form is issued. Report from your year-end statement and contemporaneous log. If a form arrives later showing a different amount, file an amended return.

Step 5: If the form is wrong. Export your full transaction history and reconcile bet-by-bet. Contact the sportsbook's tax support to dispute amounts. If unresolved, file using your documented figures and attach a written statement explaining the discrepancy.

When You Should Work with a CPA

Most casual bettors with modest activity can handle their own reporting. But if any of the following apply, professional help is worth the investment:

• You used three or more sportsbooks and need to consolidate
• You received W-2G forms that don't match your actual net results
• You gambled in multiple states
• Your total gambling activity (wins plus losses) exceeds $10,000 for the year
• You're evaluating whether to itemize deductions
• You received a 1099-K from PayPal or Venmo related to gambling transactions
• You're a high-volume bettor concerned about phantom income under the 2026 rules
• You want to evaluate whether you qualify as a professional gambler

Gambling reporting can require records and classification analysis beyond consumer software. Compare any professional fee with the written scope; no tax savings or fee breakeven is promised.

Key Takeaway

Reporting DraftKings and FanDuel income is straightforward once you know the process: download all platform statements, report gross winnings on federal Form 1040 Schedule 1 Line 8b, deduct losses on Schedule A Line 16 if you itemize, and report net gambling income on the NJ-1040. For 2025 returns, you can still deduct 100% of losses. For 2026 activity, the federal deduction is capped at 90% - but NJ still allows full netting. A return preparer can compute the federal and NJ treatment from client-supplied records, but no combined-tax result is promised. Learn about the gambling tax services

Important: DraftKings Predictions & FanDuel Predicts

Prediction-market products and availability change quickly. Event-contract classification remains unsettled; preserve platform statements and contract-level records separately from sportsbook records. A records-first approach does not choose a filing position.

Related reading: How NJ Taxes Gambling Winnings | Gambling tax services

Frequently Asked Questions

Ready to File With Confidence?

Tax rules change frequently. Use the contact form to request a written scope; submitting it does not promise a call, engagement, or outcome. Greg Monaco is a NJ-licensed CPA and the firm's sole practitioner.

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