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Are Prizes and Raffles Taxable?

By JLP | December 11, 2006

I received the following question from a reader:

Just wondering if you could provide a good tax resource or your opinion? I won a raffle prize at my company sponsored Christmas party. This was a free raffle which you were entered in for simply attending. The amount of the prize is valued at $600. Are taxes applicable on this as I did not pay to enter?

Answer:

Yes, it is taxable. You need to report it on Line 21 on Form 1040 (PDF). For more information, see this section in Publication 17. However, being that it is only $600, it is doubtful that it will have much effect on your taxes.

Hope this helps!

Topics: Tax Planning, Taxes | 10 Comments »


10 Responses to “Are Prizes and Raffles Taxable?”

  1. The Sarcasticynic Says:
    December 11th, 2006 at 8:17 pm

    Humbug!!!!!!

  2. John M Says:
    December 11th, 2006 at 9:59 pm

    If you won a prize in your company drawing that was worth $50.00 would you be required to report it?

  3. Leslie Turek Says:
    December 12th, 2006 at 7:38 am

    Depending on your bracket, your taxes could be several hundred dollars. Not trivial. Suppose you didn’t even want the item. Suppose you turned around and immediately resold it, but could only get $300 for it. Would that be evidence that the correct valuation is $300, nor $600, and could you then pay taxes on only $300 of value?

    I have a tendency to stay out of raffles and drawings unless the prize is something that I really want and would be willing to pay [the taxes] for.

  4. harold Says:
    December 12th, 2006 at 9:17 am

    That actually is precisly my problem. It is a prize that I have no use for and I highly doubt that I could resell it for the $600 stated value.

  5. kurt Says:
    December 12th, 2006 at 10:13 am

    Harold, if you itemize, couldn’t you donate it to charity and receive a deduction in the amount of the line 21 item? I’m not a tax adviser!

  6. Traciatim Says:
    December 12th, 2006 at 12:43 pm

    You should all move to Canada. Prizes are not taxable here, including the lottery. If you win 10M, you walk away with 10M.

  7. sadhu Says:
    December 12th, 2006 at 2:15 pm

    do people actually report prizes won in raffles.
    it’s like reporting tips I guess; honor system.

    Or how about paying state taxes on items bought
    from out of state sellers; does any one actually pay that?

    I like the canada systen.

  8. JLP Says:
    December 12th, 2006 at 2:26 pm

    Sadhu,

    Do people actually report prizes won in raffles?

    They better. Especially if the company withholds for taxes on the prize.

  9. dimes Says:
    December 12th, 2006 at 3:11 pm

    If the company withholds taxes on the prize, won’t they send you a 1099-misc or something?

    I’m really curious as to whether or not I’ll get a reporting form for the $100 I made as an election judge. They didn’t take out any withholding or FICA on it, so I don’t see any real reason to report it other than that I “should.” If I get a form I will, of course, but if not, I’m not sure.
    I suppose technically I would be considered a subcontractor and should file a Schedule C, except that the amount of income is below the $400 filing requirement. Kay from dontmesswithtaxes could probably offer some excellent advice.

  10. Larry Seeley Says:
    February 28th, 2009 at 2:12 pm

    Can raffle tickets be included in gambling winnings if an investment was required in order to win?

    I won a $24,000 drawing at a local casino and received a 1099. In order to enter the drawing, I was required to gamble and accumulate entry tickets based on my volume of play.

Comments