How Does Paying Taxes Work on PrizePicks: The Complete Guide to Fantasy Sports Tax Obligations in 2025

Winning money on PrizePicks feels incredible until you realize Uncle Sam wants his cut too. If you've been crushing your fantasy sports picks and building up those winnings, you're probably wondering exactly how does paying taxes work on PrizePicks and what you need to do come tax season.

Let me break this down for you in plain English. I've spent hours researching the latest tax regulations and talking to people who've been through this process, so you don't have to stress about getting it wrong. Whether you're a casual player who hit a lucky streak or someone making serious money on the platform, understanding your tax obligations will save you headaches and potentially costly mistakes down the road.

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Key Takeaways

Before we dive deep, here are the essential points you need to know about how paying taxes work on PrizePicks:

All PrizePicks winnings are taxable income, regardless of amount or whether you receive tax forms
The $600 threshold determines if you'll receive a 1099-MISC form, not whether you owe taxes
You can deduct gambling losses, but only if you itemize deductions and have proper documentation
State tax obligations vary significantly depending on where you live
Proper record keeping is crucial to avoid penalties and maximize deductions

The Basics: Are PrizePicks Winnings Actually Taxable?

Here's the truth that catches many players off guard: every dollar you win on PrizePicks is considered taxable income by the IRS under Internal Revenue Code Section 61. This isn't just for big winners – even if you only won $50 for the entire year, technically, you're supposed to report it.

The IRS doesn't care that you consider it "just fantasy sports" or that you're playing with friends. Daily fantasy sports platforms like PrizePicks are classified as gambling for tax purposes, which means your winnings fall under the same rules as casino earnings or lottery tickets.

Why This Matters for Your Tax Situation

When I first learned this, I was shocked. I thought fantasy sports were somehow different from "real gambling." But the government sees it differently. Your PrizePicks winnings get taxed at your regular income tax rate, which could be anywhere from 10% to 37% depending on your total income for the year.

Let's say you won $2,000 on PrizePicks and you're in the 22% tax bracket. That means you'll owe approximately $440 in federal taxes on those winnings. Add state taxes if you live in a state that charges them, and your tax bill could easily hit $500 or more.

The Reality Check Most Players Need

I've seen too many people get blindsided by this. They spend their winnings thinking it's "free money," only to discover they owe hundreds or thousands in taxes they never set aside. Don't be that person frantically scrambling for money in April.

Understanding the $600 Threshold That Changes Everything

This is where things get interesting and where most confusion happens. PrizePicks is required to send you a 1099-MISC form if your net winnings exceed $600 for the calendar year. Notice I said "net winnings" – this is crucial.

How PrizePicks Calculates Your Net Winnings

Net winnings = Total prizes won - Entry fees paid + Any bonuses received

This formula trips up a lot of people. Let's say you entered $2,000 worth of contests throughout the year and won $2,400 in prizes. Your net winnings would be $400 ($2,400 - $2,000), so you wouldn't receive a 1099-MISC form. But you'd still owe taxes on that $400.

What Happens When You Hit the $600 Mark

If you exceed $600 in net winnings, PrizePicks will automatically upload your 1099-MISC form to the Tax Information section of your account. They'll also mail you a physical copy to the address on file. This typically happens in February for the previous tax year.

Here's what many people don't realize: The $600 threshold is just for reporting requirements, not tax obligations. Even if you only won $100 net for the year, you're still supposed to report and pay taxes on it.

The PayPal Complication

If you withdrew your winnings through PayPal, you might also receive a 1099-K form from PayPal. This can create confusion because you might get tax forms from both PrizePicks and PayPal for the same winnings. Don't panic – you're not being taxed twice. The 1099-K from PayPal simply reports the transactions, while the 1099-MISC from PrizePicks reports your actual gambling income.

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Tax Forms You'll Encounter: 1099-MISC, W-2G, and 1099-K

Understanding these forms will save you from making expensive mistakes when filing your taxes. Each one serves a different purpose and gets reported differently on your tax return.

Form 1099-MISC: The Most Common One

The 1099-MISC form reports miscellaneous income, including prize winnings that don't meet W-2G criteria. This is what most PrizePicks players will receive if they hit the $600 threshold.

Key details about 1099-MISC:

Box 3 will show your "Other Income" – this is your net winnings from PrizePicks
You don't mail this form anywhere – PrizePicks already sent a copy to the IRS
You use the numbers from this form when filing your tax return
Keep the original for your records in case of an audit

Form W-2G: For Bigger Winners

The W-2G form is issued for gambling winnings that meet specific thresholds, such as $600 or more and at least 300 times the wager. This is less common for typical PrizePicks play but could happen if you hit a massive parlay.

If you receive a W-2G, the income gets reported on Form 1040, Schedule 1, under "Other Income" just like the 1099-MISC.

Form 1099-K: The PayPal Factor

The 1099-K form reports payment card and third-party network transactions. If you used PayPal to withdraw your PrizePicks winnings, you might receive this form.

Important note: The 1099-K doesn't necessarily mean all of that money is taxable income. It just reports transaction volume. You still need to determine your actual gambling gains and losses.

What If You Don't Receive Any Forms?

It doesn't matter if you receive a 1099-MISC or W-2G reporting your winnings or not. You'll still need to report all income to the IRS. The absence of a tax form doesn't eliminate your tax obligation.

How to Report Your PrizePicks Income on Your Tax Return

This is where the rubber meets the road. Your PrizePicks winnings should be reported as "Other Income" on Schedule 1 of Form 1040, and you'll need to pay taxes on them regardless of whether you received tax forms.

Step-by-Step Reporting Process

If using tax software like TurboTax:

Look for the "Additional Income" or "Other Income" section
Select "Gambling Winnings" when prompted
Enter the amount from your 1099-MISC (Box 3) or your calculated winnings if no form received
The software will automatically place this on the correct line of Schedule 1

If filing manually:

Report gambling winnings on Form 1040, Schedule 1, Line 8b
Write "Gambling winnings" next to the amount
Attach any supporting documentation if requested

The Tax Rate Reality

Your PrizePicks winnings get added to your other income and taxed at your marginal tax rate. Tax rates range from 10% to 37% as of 2024, depending on your overall income and tax bracket.

Example calculation:

Your regular job income: $60,000
PrizePicks winnings: $3,000
Total taxable income: $63,000
If this puts you in the 22% bracket, you'll owe about $660 in federal taxes on your PrizePicks winnings

Backup Withholding Concerns

PrizePicks winnings may be subject to backup withholding if you fail to provide a correct taxpayer identification number. This is why it's crucial to keep your account information updated with your correct Social Security number.

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Deducting Your Losses: What You Can and Can't Claim

Here's where things get tricky, and this is probably the most misunderstood aspect of how paying taxes work on PrizePicks. You may deduct gambling losses only if you itemize your deductions on Schedule A and kept a record of your winnings and losses.

The Itemization Requirement

This is the big catch that trips up most people. For most people, the standard deduction ($13,850 for single filers in 2025) is higher than their itemized deductions would be. This means tracking losses might not help your tax situation unless you have other significant deductions.

You can only deduct losses if:

You choose to itemize deductions instead of taking the standard deduction
You have detailed records of all your gambling activity
Your total itemized deductions exceed the standard deduction amount

What Counts as Deductible Losses

You can deduct:

Entry fees for contests you didn't win
Documented losses from actual wagers
Transaction fees related to deposits and withdrawals

You cannot deduct:

More losses than you had winnings (you can't create a net gambling loss)
Money you deposited but didn't actually wager
Opportunity costs or theoretical losses

Record Keeping for Loss Deductions

You need to track actual wagers that didn't win (your losses), not just deposits. Keep a detailed log showing:

Date of each contest
Entry fee amount
Result (win/loss)
Payout amount if you won

The Reality for Most Players

Unless you have other significant itemized deductions (mortgage interest, large charitable donations, high medical expenses), claiming gambling losses probably won't save you money. Run the numbers both ways before deciding.

State Tax Considerations for PrizePicks Players

State taxes add another layer of complexity to understanding how paying taxes work on PrizePicks. State tax obligations for PrizePicks winnings vary widely. States like Florida and Texas do not impose personal income taxes, while states such as New York and California have higher tax rates.

States with No Income Tax (Lucky You!)

If you live in these states, you only owe federal taxes on your PrizePicks winnings:

Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming

High-Tax States to Watch Out For

Some states will take a significant bite out of your winnings:

California: Up to 13.3%
New York: Up to 10.9%
New Jersey: Up to 10.75%
Hawaii: Up to 11%

How State Taxes Work with Gambling Winnings

In states with income tax, gambling winnings are often taxed at the standard state income tax rate. This means your PrizePicks winnings get added to your other income and taxed accordingly.

Example for a California resident:

PrizePicks winnings: $5,000
Federal tax (22% bracket): $1,100
California state tax (9.3% bracket): $465
Total tax burden: $1,565

Multi-State Complications

If you moved during the year or have income in multiple states, consult a tax professional. State tax rules for gambling winnings can get complex when multiple jurisdictions are involved.

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Record Keeping: Protecting Yourself from IRS Audits

Maintaining accurate records of your PrizePicks winnings is critical. The IRS can audit gambling income, and you'll need documentation to support your claims.

Essential Records to Maintain

For every PrizePicks session, document:

Date and time of contests
Entry fees paid
Contest details (sport, picks made)
Payout amounts (if any)
Screenshots of contest results
Bank/PayPal transaction records

Digital Tools That Make Life Easier

Consider using:

Spreadsheet tracking with running totals
Financial software that categorizes transactions
Mobile apps designed for gambling record keeping
Screenshots of your PrizePicks transaction history

What the IRS Looks For in Audits

Thorough recordkeeping ensures accurate reporting and provides support in case of an audit. The IRS wants to see:

Consistent record keeping throughout the year
Documentation that matches reported amounts
Clear separation between gambling and personal expenses
Evidence of actual gambling activity (not just random numbers)

How Long to Keep Records

Keep all gambling-related tax records for at least three years after filing your return. If you claim significant losses or the IRS suspects unreported income, they might look back further.

Common Mistakes That Could Cost You Money

Learning from other people's mistakes is cheaper than making your own. Here are the most expensive errors I've seen PrizePicks players make.

Mistake #1: Not Reporting Small Winnings

The Problem: Thinking winnings under $600 don't need to be reported. The Reality: The IRS requires you to report all income even if you do not receive tax forms. The Cost: Penalties and interest if the IRS discovers unreported income.

Mistake #2: Double-Counting PayPal 1099-K Forms

The Problem: Getting confused by receiving both 1099-MISC from PrizePicks and 1099-K from PayPal. The Reality: These often report the same income from different angles. The Solution: Reconcile the forms and report your actual gambling gains, not the transaction volume.

Mistake #3: Claiming Losses Without Itemizing

The Problem: Trying to deduct gambling losses while taking the standard deduction. The Reality: You can only deduct gambling losses if you itemize deductions instead of taking the standard deduction. The Cost: Wasted time and potential audit flags.

Mistake #4: Poor Record Keeping

The Problem: Not tracking individual contests and relying only on deposit/withdrawal totals. The Reality: You need to track actual wagers that didn't win (your losses), not just deposits. The Cost: Inability to substantiate deductions and maximize tax benefits.

Mistake #5: Not Setting Aside Tax Money

The Problem: Spending all winnings without considering tax obligations. The Reality: Taxes are due regardless of whether you still have the money. The Cost: Scrambling to find tax money or taking on debt to pay the IRS.

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Planning Ahead: Setting Aside Money for Tax Season

Smart tax planning starts the moment you win, not in April when taxes are due. Here's how to stay ahead of the game.

The 25% Rule

A good rule of thumb is to set aside 25-30% of your net winnings for taxes. This covers federal taxes (up to 37%), potential state taxes, and gives you a buffer for any penalties or interest.

Quick calculation example:

Net PrizePicks winnings for the year: $4,000
Amount to set aside (25%): $1,000
Money you can safely spend: $3,000

Quarterly Estimated Payments

If your winnings surpass certain thresholds, you may need to make quarterly estimated tax payments rather than waiting to pay on tax day. Generally, if you'll owe more than $1,000 in taxes on your gambling winnings, you should make quarterly payments.

Quarterly payment due dates:

Q1: April 15
Q2: June 15
Q3: September 15
Q4: January 15 (following year)

Separate Savings Account Strategy

Open a dedicated savings account for gambling taxes. Every time you withdraw winnings from PrizePicks, immediately transfer 25-30% to this tax account. Don't touch it until tax season.

Working with a Tax Professional

Consider hiring a tax professional if:

Your gambling winnings exceed $5,000 annually
You live in a high-tax state
You have complex deductions or multiple income sources
You've received multiple tax forms from different platforms

The cost of professional help is often less than the mistakes you might make on your own.

Conclusion

Understanding how paying taxes work on PrizePicks doesn't have to be overwhelming once you know the rules. The key points to remember are simple: all winnings are taxable regardless of amount, proper record keeping is essential, and planning ahead will save you stress and money.

Your action plan should be:

Start tracking every contest immediately with detailed records
Set aside 25-30% of net winnings for taxes in a separate account
Understand which tax forms you might receive and what they mean
Know your state tax obligations and factor them into your planning
Consider professional help if your situation gets complex

Don't let tax obligations discourage you from enjoying fantasy sports, but don't ignore them either. Filing taxes incorrectly can lead to penalties, with accuracy-related penalties of 20% and failure-to-file penalties of up to 25%. A little preparation goes a long way toward keeping more of your hard-earned winnings.

The most successful PrizePicks players I know treat taxes as just another part of the game. They track everything, set money aside, and file correctly. Follow their lead, and you'll maximize your profits while staying on the right side of the IRS.

Remember, tax laws can change, and everyone's situation is different. When in doubt, consult with a qualified tax professional who can provide advice specific to your circumstances.

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Frequently Asked Questions

Do I have to pay taxes on PrizePicks winnings if I don't withdraw the money?

Yes, you owe taxes on all gambling winnings regardless of whether you withdraw them or leave them in your PrizePicks account. The IRS considers gambling winnings as income when you win, not when you access the money.

What happens if I lose money overall on PrizePicks but still receive a 1099-MISC?

This can happen if you had net winnings during certain periods but overall losses for the year. You still need to report the income shown on the 1099-MISC, but you may be able to deduct your documented losses if you itemize deductions.

Can I deduct the cost of premium picks or strategy guides as business expenses?

Generally no, unless you can prove you're operating as a professional gambler (which is extremely difficult to establish). For most players, these would be considered personal expenses that aren't deductible.

What if PrizePicks doesn't send me a 1099-MISC but I think I should have received one?

Contact PrizePicks customer support if you believe you exceeded $600 in net winnings but didn't receive a form by the end of February. Regardless, you're still required to report all winnings even without receiving forms.

How does the IRS know about my PrizePicks winnings if I don't report them?

PrizePicks reports payouts to the IRS, and financial institutions report transaction data. The IRS has sophisticated matching systems that can identify unreported gambling income. It's not worth the risk of penalties and interest.

Are there any tax advantages to playing PrizePicks through a business entity?

This is a complex area that requires professional guidance. In most cases, casual gambling cannot be treated as a business activity. Consult with a tax professional if you believe you might qualify as a professional gambler.

What records should I keep if I play on multiple fantasy sports platforms?

Keep separate records for each platform showing your net winnings or losses. This helps you properly report income from each source and maximize any loss deductions you might be eligible for.

Do I need to pay taxes on promotional bonuses or free contest entries?

Yes, promotional bonuses and the value of free entries that result in winnings are generally considered taxable income. The fair market value of any prizes or bonuses should be included in your gambling income calculations.

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