Yes, you pay taxes on DraftKings winnings even if you don’t withdraw them. Under the IRS doctrine of constructive receipt, money becomes taxable the moment it lands in your DraftKings balance and is available for you to take out, not when you actually transfer it to your bank. Leaving the funds in your account does not postpone the tax bill by a single day.
Why Leaving Money in Your Account Doesn’t Delay the Tax
The IRS regulation on constructive receipt says income you haven’t physically collected is still taxable in the year it’s credited to your account, set apart for you, or otherwise made available for you to draw on at any time.1eCFR. 26 CFR 1.451-2 Constructive Receipt of Income The only exception is when your control over the funds is subject to substantial limitations or restrictions. A DraftKings balance doesn’t meet that exception. You can request a withdrawal whenever you want, so the money counts as yours the instant it posts.
The timing question gets sharpest at year end. If a $2,500 parlay hits on December 28 and the funds settle to your balance that day, those winnings belong on that year’s return even if you don’t move the money to your bank until February. The tax year is set by when you could access the funds, not when you chose to.
Gross income, by statute, is “all income from whatever source derived.”2Office of the Law Revision Counsel. 26 U.S. Code 61 – Gross Income Defined Gambling winnings are ordinary income, taxed alongside your wages and everything else. There is no special deferral for sportsbook or daily fantasy winnings held on the platform.
When DraftKings Sends You a Tax Form
DraftKings files tax forms with the IRS when your winnings cross certain thresholds. For 2026, the minimum reporting threshold for Form W-2G has been adjusted for inflation to $2,000, up from the longstanding $600 floor, and the payout must also be at least 300 times the amount wagered.3Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026) Both conditions have to be met. Most straight sports bets don’t hit the 300-times multiplier, but parlays and long-shot futures can.
Daily fantasy sports work differently. DraftKings reports DFS winnings on a Form 1099-MISC when your net profit for the year reaches $600 or more, measured across all contests rather than any single wager.
Here’s the important part: whether or not you receive a form, you still have to report every dollar of gambling winnings as income.4Internal Revenue Service. Topic No. 419, Gambling Income and Losses The forms exist for the IRS’s recordkeeping. Your obligation doesn’t wait on them.
When DraftKings Withholds Taxes Up Front
Getting a form and having tax withheld are two different things. DraftKings must withhold 24% of your net winnings (the payout minus your wager) when both of these conditions are met: the net exceeds $5,000, and the payout is at least 300 times the wager.5Internal Revenue Service. Instructions for Forms W-2G and 5754 – Section: Withholding That 24% goes to the IRS as a credit toward your yearly tax bill, similar to withholding from a paycheck.
If you haven’t given DraftKings a valid Social Security number or taxpayer identification number, backup withholding kicks in at the same 24% rate, even on smaller reportable amounts.5Internal Revenue Service. Instructions for Forms W-2G and 5754 – Section: Withholding When nothing is withheld, the full bill is yours to settle at filing time, and a large unwithheld win can also push you into quarterly estimated tax territory.
Reporting the Winnings on Your Return
Gambling winnings go on Schedule 1 (Form 1040), Line 8b.6Internal Revenue Service. 2025 Schedule 1 (Form 1040) – Section: Part I Additional Income You report the full gross amount before subtracting any losses. That total flows into your main Form 1040 and becomes part of your adjusted gross income, which drives your tax bracket and your eligibility for various credits.
Use the W-2G and 1099 forms DraftKings sends you to populate the numbers. For wins that didn’t generate a form, you’ll pull from your own records. DraftKings provides transaction histories and year-end account statements through your account settings.
State taxes add another layer. Most states with an income tax also tax gambling winnings, and the rules vary. A few states have no income tax at all; others set their own withholding thresholds and rates. Check your state’s department of revenue for the specifics.
Can Losses Offset What You Owe?
You can deduct gambling losses, but only if you itemize deductions 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.7Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Unless your total itemized deductions clear those amounts, listing gambling losses won’t help you.
Even for itemizers, two caps apply. You can only deduct 90% of your gambling losses for the year, and the deduction can never exceed your total gambling winnings.8Office of the Law Revision Counsel. 26 U.S. Code 165 – Losses – Section: (d) Wagering Losses Report $10,000 in winnings against $10,000 in losses and you can deduct $9,000, not the full $10,000. Lose $6,000 against bigger winnings and you can deduct $5,400. Losses can never produce a net loss that offsets wages or investment income.
The IRS expects you to back up every claimed loss with records: a log of each wager with the date, type, amount, and result, supported by DraftKings statements and deposit records.4Internal Revenue Service. Topic No. 419, Gambling Income and Losses
The Hidden Cost of a Higher AGI
Because gambling winnings raise your AGI, they can quietly trigger costs that have nothing to do with gambling taxes themselves. This is where people get blindsided, especially since you report gross winnings even if you broke even for the year.
Retirees on Medicare whose modified AGI crosses $109,000 (single) or $218,000 (joint) face income-related monthly adjustment amounts that increase their Part B and Part D premiums. The first-tier Part B surcharge is $81.20 per month, and the top tier (above $500,000 single or $750,000 joint) reaches $487.00 monthly.9Centers for Medicare & Medicaid Services (CMS). 2026 Medicare Parts A and B Premiums and Deductibles IRMAA is calculated from the tax return filed two years earlier, so a big 2026 affects premiums in 2028.
Higher AGI can also shrink Affordable Care Act premium subsidies, push more of your Social Security benefits into the taxable zone, and phase out eligibility for education credits and the child tax credit. The loss deduction doesn’t rescue you here, because AGI is calculated before itemized deductions. You report $20,000 in gross winnings on Schedule 1 even if you also deduct $18,000 in losses on Schedule A. Your AGI reflects the full $20,000.
What Happens If You Don’t Report
Skipping gambling income on your return doesn’t stay quiet for long. DraftKings files copies of every W-2G and 1099 directly with the IRS, which matches those forms against your return.
The failure-to-pay penalty runs 0.5% of the unpaid tax per month, capped at 25%.10Internal Revenue Service. Failure to Pay Penalty The failure-to-file penalty is steeper at 5% per month, also capped at 25%, and for returns due after December 31, 2025, the minimum failure-to-file penalty is $525 or 100% of the unpaid tax, whichever is less.11Internal Revenue Service. Failure to File Penalty Interest runs on top at 7% annually for the first quarter of 2026, adjusted quarterly.12Internal Revenue Service. Quarterly Interest Rates If the amount you left off is large enough to count as a “substantial understatement” (the greater of 10% of the tax owed or $5,000), an additional 20% accuracy-related penalty applies.13Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
The practical takeaway is simple. Treat winnings as taxable when they hit the account, pull your DraftKings transaction report at least once a quarter, and set aside enough from each win to cover the tax before the money feels like yours to spend.