Understanding Form 1099-NEC and tax duties for gamers

It might be a safe bet to say most people know that real-world income means you’ll have some real-world tax responsibilities. But did you know activities in the gaming universe may also lead to tax implications for the real world?

Gaming currency and real-world taxes

It’s true. If you convert game currency to real currency, you may have to report this transaction as income. This applies to various gaming platforms where you can earn or trade virtual currency, such as in-game rewards, cryptocurrency, or other digital assets. When you convert these virtual earnings into real money, it becomes taxable income.

What is Form 1099-NEC?

Form 1099-NEC, or Nonemployee Compensation, is a tax form used to report payments made to individuals who are not employees. This form is typically used for freelancers, independent contractors, and other self-employed individuals. However, it is also used for reporting income from gaming activities when you convert virtual currency to real money.

Is there a minimum amount to trigger getting Form 1099-NEC?

Yes, there’s a minimum amount of income for each platform. That means you might get multiple forms.

• If you receive more than $600 from these activities, the platform will send you Form 1099-NEC to report the income.
• If you receive less than $600 from any one platform, you may not receive Form 1099-NEC, but you’ll still need to report the information on your taxes.

What does the form show?

Form 1099-NEC shows the total amount of nonemployee compensation you received during the year. This includes any payments made to you for work you’ve done, as well as income from gaming activities. The form will also indicate if any federal income tax was withheld from your payments.

Where do you put this information on your taxes?

When you receive Form 1099-NEC, you need to report the income on your tax return. The amount shown in Box 1 of the form should be included on the “Other income” line of Schedule 1 (Form 1040). If you are self-employed, you may need to report this income on Schedule C (Form 1040) and pay self-employment tax.

When is the form sent?

Form 1099-NEC is typically sent to you by January 31 of the year following the tax year in which you received the income. This means if you earned gaming income in 2024, you should receive the form by January 31, 2025. It’s important to keep an eye out for this form and ensure you include the reported income on your tax return.

What tax breaks can I get if I have gaming income?

If you have gaming income, you may be eligible to deduct some expenses to help offset your tax bill. However, this will vary depending on if the money you receive is considered hobby income or business income.

If your activity is related to a business, here are a few expenses you may be able to deduct:

• Computer/Gaming system: The cost of purchasing and maintaining a computer system used for gaming can be deducted.
• Camera: If you use a camera for streaming or recording your gaming sessions, this expense may be deductible.
• Recording equipment: Any equipment used to record or stream your gaming activities could be deducted.
• Gaming chair: A gaming chair used for your gaming setup may also be a deductible expense.
• Office space: If you have a space that’s fully or partially dedicated to gaming, you might also qualify for the home office deduction. This allows you to deduct a portion of your home expenses, such as rent or mortgage interest, utilities, and internet, based on the percentage of your home used for business purposes.

Get help reporting your gaming income from H&R Block

As a gamer, it’s essential to be aware of your tax responsibilities when converting virtual currency to real money. Understanding Form 1099-NEC and how to report your gaming income can help you stay compliant with tax regulations and avoid any potential issues with the IRS.

Start your return with H&R Block Online today!