DraftKings does take taxes out of your winnings, but only on large, long-odds payouts: the company withholds 24% for federal income tax when your net winnings exceed $5,000 and the payout is at least 300 times your wager. Below that line, you receive the full amount with nothing held back. You still owe tax on the profit either way.
When Withholding Kicks In
Two conditions have to be met at the same time before DraftKings withholds anything. Your payout minus your wager must exceed $5,000, and the payout must be at least 300 times what you bet.1Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source A $10 parlay that cashes for $5,015 clears both bars, so 24% comes out. A $100 bet that returns $5,200 does not, because the payout is only 52 times the wager, and you receive the whole amount.
The 24% withheld is not the final bill. It’s an advance credited against what you actually owe when you file. If your marginal rate is higher, you’ll owe more at tax time; if it’s lower, you’ll get some back.
One trap catches players who never updated their account information. If DraftKings doesn’t have a valid Social Security number or taxpayer ID on file, backup withholding of 24% applies to any reportable payout, not just the ones over $5,000.2Internal Revenue Service. Backup Withholding Providing a correct taxpayer ID when you set up the account avoids it.
The Tax Forms You’ll Receive
DraftKings sends different forms depending on which product you played. Sportsbook, Casino, and Pools winnings go on a Form W-2G. Daily Fantasy Sports and Pick6 net earnings are reported on Form 1099-MISC.3DraftKings. Key Tax Dates For DraftKings (US) Both are due to you by January 31 for the prior year.4Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)
The reporting threshold jumped for 2026. It used to sit at $600. Starting this year, DraftKings only has to issue a W-2G or 1099-MISC when net winnings hit $2,000, and that floor will adjust for inflation annually.4Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)5Internal Revenue Service. 2026 Publication 1099 The W-2G’s 300-to-1 payout rule still applies alongside the $2,000 floor.
What this means in practice: an $1,800 sportsbook win on a $5 bet won’t generate a W-2G in 2026 even though it would have last year. The tax you owe on it hasn’t changed. The IRS just won’t be notified directly.
On the W-2G, Box 1 shows gross winnings and Box 4 shows any federal tax withheld. You report gambling income on Schedule 1 of Form 1040 under “Other Income.”6Internal Revenue Service. Topic No. 419, Gambling Income and Losses
You Owe Tax Even Without a Form
The higher reporting threshold will leave a lot of winners without any tax form. That changes nothing about the underlying obligation. The IRS requires you to report all gambling income, regardless of the amount and regardless of whether a form was issued.6Internal Revenue Service. Topic No. 419, Gambling Income and Losses A $500 win is as taxable as a $5,000 one.
The cleanest way to track this is your DraftKings transaction history. Download it at year-end and total your winnings. Losses don’t cancel wins on your income line: if you won $1,200 in September and lost $800 in October, you report $1,200 of income and handle the losses separately.
Deducting Your Losses
Gambling losses are deductible, but only if you itemize on Schedule A instead of taking the standard deduction. For 2026 the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, so most casual bettors won’t clear that bar just from gambling losses.7Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
There’s also a new cap. Under the One Big Beautiful Bill Act signed in 2025, you can deduct only 90% of your gambling winnings in losses, not the full dollar-for-dollar amount that used to be allowed. Win $10,000 and lose $10,000, and you can deduct $9,000. The remaining $1,000 is taxable even though you broke even in reality.
Losses still can’t exceed reported winnings. You can’t use a bad year to offset your salary. And you have to report the full winnings as income first, then take the loss deduction on Schedule A.8Internal Revenue Service. Publication 529, Miscellaneous Deductions
Records the IRS Expects
If you plan to claim losses, keep a log. The IRS wants the date of each wager, the type of bet, the amount won or lost, and where the bet was placed.6Internal Revenue Service. Topic No. 419, Gambling Income and Losses DraftKings account statements support the log. Keep them with any W-2G or 1099-MISC. Without records, a challenged deduction gets denied.
Estimated Payments on Big Wins
If a large win doesn’t trigger withholding, you may need to make an estimated tax payment rather than waiting until April. The IRS expects quarterly estimates when you’ll owe $1,000 or more at filing time after accounting for withholding.9Internal Revenue Service. Estimated Taxes
For 2026, quarterly deadlines fall on April 15, June 15, September 15, and January 15, 2027.10Internal Revenue Service. Publication 509 (2026), Tax Calendars You can dodge the underpayment penalty by paying at least the lesser of 90% of the current year’s tax or 100% of last year’s (110% if your prior-year AGI was above $150,000).11Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals Send the payment using Form 1040-ES or IRS Direct Pay by the next quarterly deadline after the win.
What Happens If You Skip It
Every W-2G and 1099-MISC DraftKings issues also goes to the IRS. Automated matching compares those forms against your return. A mismatch generates a CP2000 notice proposing additional tax plus interest, usually 12 to 18 months after you file.12Internal Revenue Service. Understanding Your CP2000 Series Notice Ignore it and the IRS moves to collection. When no form was issued, immediate matching doesn’t catch the omission, but bank deposits and platform records can still surface in an audit.
State Taxes Are Separate
Federal is only half of it. Most states with legal sports betting also tax winnings as income, and the rules vary: some states mirror the federal withholding structure, others set their own thresholds, and a handful with no income tax skip the state layer entirely for residents.
Many states source the winnings to the state where the bet was legally placed. Travel to another state, place a bet there, and you may owe that state’s income tax on the win even if your home state doesn’t tax income. You’d file a nonresident return there. Most resident states offer a credit for taxes paid to another state on the same income, so double taxation is generally avoided, but the credit is capped at whichever amount is lower. Check the specific rules with your state revenue department.
If You’re Not a U.S. Resident
Non-resident aliens face a flat 30% federal withholding rate on gambling winnings rather than 24%, reported on Form 1042-S instead of a W-2G.13Internal Revenue Service. Instructions for Form 1042-S (2026) Some countries have tax treaties with the U.S. that reduce or eliminate the rate; claiming the treaty rate requires filing Form W-8BEN with DraftKings.
Professional Gamblers Follow a Different Track
The rules above assume you’re a recreational bettor. Someone who gambles full time, with regularity, in good faith, and for a livelihood is treated by the IRS as running a business, reporting on Schedule C rather than Schedule 1 and Schedule A. That comes with self-employment tax of roughly 15.3% on net earnings on top of income tax, and claiming professional status draws closer IRS scrutiny. It’s not a workaround for a recreational bettor who happened to have a good year.