Do You Need to Pay Taxes on Game Show Winnings?
Have you ever dreamed about winning thousands of dollars, a new car, and a trip to a tropical paradise on a game show like Wheel of Fortune? Are you ready to be called down the aisle as the next contestant on the Price is Right?
Being on a game show and winning those fantastic prizes is exciting, but what may not be so exciting is finding out the following spring that you now have a very large tax bill.
Although you are probably going to have to pay taxes on game show winnings, the specific details of how the prize gets taxed can differ depending on the prize, amount, and where you live.
There are a few times when you don’t have to pay taxes on game show winnings. First, you don’t have to claim winnings under $50 on your taxes. That’s the good news if you weren’t very lucky on the game show.
Also, if you live in one of the states that doesn’t have an income tax (Alaska, Texas, Florida, Nevada, Washington, Wyoming, Nevada, and South Dakota), you can at least avoid paying state taxes on your winnings.
One thing to be aware of is that your game show winnings may push you into a much higher income tax bracket. In addition, you’ll be taxed at both the state (and possibly local) and federal level. According to the IRS, game show winnings of at least $50 are taxed as miscellaneous income.
It’s probably a good idea to talk to an accountant if you are going on a game show and could have large prize winnings. If you can’t afford to pay the taxes on your prize, it can really ruin the excitement of winning.
If you win cash, you can set aside part of your winnings to cover your tax burden. If you win something other than cash, however, you’ll still owe taxes based on the value of your winnings.
Even game show prizes such as cars and trips are still subject to income tax, so don’t think you’ve gotten out of owing taxes because you didn’t win cash. Trips and cars can be trickier when it comes to taxes. You’ll be required to claim the value of the prize on your income taxes and will be taxed accordingly as if that prize were cash.
As exciting as it can be to win a luxurious trip or brand new car, you may not have the cash available to pay the taxes on the prize. Many game shows allow you to request the cash value in place of the prize, so be sure to ask about that if coming up with the cash for the taxes due is going to be a problem for you.
One way you can get out of paying taxes on your game show winnings is by gifting them to friends and family members. According to IRS rules, you are eligible to gift up to $14,000 per year to as many individuals as you want.
Although you won’t be able to keep the money for yourself, it’s a great way to share your earnings with your family and avoid paying taxes on that portion of your game show winnings.