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Tax Time: How to Claim Prize Winnings on your Taxes

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It’s just about that time again, tax time, and if you have won prizes this year through sweepstakes you will want to read this post. I wrote this last year and it is still valid this year. I just updated it a bit with new information

Maybe you have questions like this one on paying taxes for prizes you won through sweepstakes.

Taxes on Sweeps?

Will the companies be sending me a 1099 or some form for taxes? or do I just tell the cpa? I don’t even know if I have to claim for a small laptop and tickets to Ellen? What do you think? Does it go by your income and how much you won?

Disclaimer: I am NOT a tax expert. These are just my experiences from years of entering sweepstakes and winning prizes. If you ever have a question about claiming prizes at tax time visit the IRS site or consult with your local tax professional or CPA for tax help.

Taxes on Sweepstakes WinsThe quick answer for the first question is yes. The sponsors should send you a 1099 for prizes you won over the value of $600. Not every sponsor does this (although they are supposed to) but that does not get you off of the hook for claiming that prize on your taxes. You should still claim the prize value on your taxes as other income. Sponsors may report smaller prizes to the IRS but do not send you paperwork.

From the IRS website:

Prizes and Award:

Subject to certain exceptions, the cash value of prizes or awards won in a drawing, quiz show program, beauty contest, or other event, must be included on the tax return as taxable income.

Taxpayers must also report the fair market value of merchandise or products won as a prize or award, as taxable income.

For example, both a $500 cash prize and the fair market value of a new range won in a baking contest must be reported as other income on Form 1040, Line 21.

So, the U.S. government DOES require that you claim each and every prize on your tax return. It is up to the individual if they follow these rules or not.

Disputing the Value of a 1099

Taxes on Sweepstakes WinsIf you look at the official rules for any sweepstakes you will see that they include the ARV or Approximate Retail Value of a prize that could be won. That doesn’t mean that prize actually IS that value when you receive it. In some cases, there are things you can do to claim a lower value on your taxes.

Example: The trip is valued by the sponsor for $5,000. You receive a 1099 at the end of the year in which you took the trip for a value of $5,000. But the trip actually only cost $3,400. You can claim $3,400 instead.

Here are some things you need to do to claim a lower amount on prizes where the 1099 comes in higher than the real value:

On Trips: You need to do this while you are on the trip or soon after you go on the trip as airline, gas, and other travel expenses fluctuate over time and trying to get accurate values a year later when it is time to file your taxes will be hard to do.

  • Keep all receipts when you go on the trip for food, gas, whatever the sponsor is paying for
  • Request a copy of the hotel bill when you check out
  • Get an estimate of what the airline or travel would cost before you go and print out that information

You only have to claim a trip prize on taxes AFTER you have taken the trip. When we won the France trip back in 2001 we didn’t actually take the trip until 2002 so we claimed it on our taxes in April 2003. That sure helps.

Other Prizes: You can also claim a lower value for a prize such as a computer or TV by finding that exact model online and printing out that information with the date showing on the paperwork as proof that this item was cheaper at the time you won it.

Remember you really need to gather the information on higher priced prizes when you win them. You may not have such good luck proving a lower value if you get the values when you try to do your taxes. Technology prices go way down over time and trying to prove that a TV you won only cost the sponsor $200 when it was worth $500 when you won it is not easy to do.

Many times you can work with the judging agency or sponsor to get them to lower the 1099 value. We have done this several time. The key to getting this done? BE NICE! Rude people do not get what they want. Always remember you are dealing with another human being and yelling and screaming will not get you the result you want.

Another reader, Mila, asked What if you win a trip but for some reason you can’t go on the trip. Do I still have to pay the tax on that or claim it as other income?

If you do not accept the trip you would not be going on it so then, no, you would not claim it on your tax return and would not have to pay taxes on it.

If you accepted the trip and then could not go on the trip for some reason there is a possibility that you could have to claim it on taxes. You would need to work with the sponsor or judging agency in that case.

And, however, if you are offered and accept something in place of the trip like cash you would have to claim that on taxes.

Claiming Sweepstakes supplies as deductions:

When you buy stamps to mail-in entries, buy envelopes or postcards for entries, pay for newsletter subscriptions, and other sweepstakes supplies, keep the receipts Why? When you win you can claim them on taxes as an expense if you are itemizing your taxes. You may need to produce those receipts if you get audited. If you are not willing to keep the receipts then do not claim expenses on your taxes.

On a side note, when you buy lottery tickets and lose, KEEP ALL OF THEM. Why? When you win you can claim them on taxes as an expense but only in the same year of the winnings.

This is why you need to keep good records and why I like using Excel for tracking sweepstakes wins and expenses. If you don’t enter mail-in sweepstakes you may not have as many expenses and therefore may have nothing to itemize.

Now, I don’t know if you can claim your Internet access cost if you win an online sweepstakes so I will leave that one up to you. I have never tried it. I believe that would be a hard one to claim because you use your Internet for so many other things.

If anyone has something to add about taxes on sweepstakes please feel free to email me or fill out my contact form. I will update this article with new information and give you credit for the new information as long as it is correct.

Claiming prize winnings on your tax return has nothing to do with your income.

So, remember, according to the IRS you must claim all sweepstakes prize winnings on your tax return. We have actually turned down prizes because we did not want to pay taxes on them and the prize wasn’t that special to us.

The IRS has a free program called Free File available on their website you can use to file your taxes online too. This is only available for those who have an adjusted gross income is $57,000 or less in 2009.

If you win small prizes like a music download or a hat the sponsors are probably not going to claim them under your individual name on their taxes or send you tax paperwork so the government wouldn’t know you won. They are probably going to claim the lump sum it cost them for all of those smaller prizes so your name wouldn’t individually be submitted to the government. However, if you win something that requires you to fill out an affidavit you definitely have to add that to your tax form.

Disclosure: this listing may contain affiliate or tracking links, which are not referral links. Read about our policies for more details.

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Comments

  1. Can expenses incurred in the process of winning an amount of cash on a game show be deducted for federal income tax purposes (for example, round-trip travel expenses between your home and the site of the game show, and lodging and meal expenses on the trip)? If the expenses are deductible, is the deduction subject to a threshold (such as having to be over a certain percentage of adjusted gross income)? Also (if the expenses are deductible), what is the proper form to report them on? Is it Schedule A?

  2. hi sweetie,

    what about claiming your blog on taxes? I have a blog, but I do not make any money off it because I don’t charge for ads or anything. I do some reviews and giveaways though. Do I need to claim all the stuff I get for my reviews? It does not add up to $600 and I blog for a hobby.

    • Erica, I am not sure about the things you get to review. If you made money with ads on your blog then definitely, you would have to claim those but for now I think you are okay not claiming the review items.

  3. corinne gonz says:

    what happens if you win a trip and get to location and they don’t have the concert tickets that where supposed to be picked up at will-call. this happened to me last week. do they deduct the concert price from the 1099

  4. Excellent article and very timely for me! Thank you!

  5. Since the prize values are reported as other income I assume the tax rate would be whatever tax bracket you are in and not just the local/state sales tax?

  6. Hi,I have a question i hope you might answer.I won a prize and was sent a w9 form to fill out,I recieved the prize today its a pair of $50 sunglasses(there very nice)I thought you only had to fill out a w9 for prizes over a certain amount.Could you please let me know how this works.

  7. Samantha Mutone says:

    I am 21 years old and do not file taxes, my mother claims me but I win sweepstakes. I was under the impression that you didn’t need to file taxes unless it was valued at 500 or more, or unless they sent you a form for it. I been sweeping a year and didn’t file any wins on taxes, I make no money so I didn’t see a reason to. What should I do?

  8. Anonymous says:

    Is there a way to calculate the amount you will have to pay in taxes based on the amount of the prize? I am new to sweeps and I just want to know what to expect. I’m on a fixed income and can’t afford to pay a lot of money out of pocket.

  9. Anonymous says:

    Is there a way to determine the amount you will have to pay in taxes based on the amount of the prize? I am new to sweeps and I just want to know what to expect. I’m on a fixed income and can’t afford to pay a lot of money out of pocket.

  10. Patricia huffman says:

    if i win a prize in say december but don’t get it till, feb. Do i file that on my taxes this year or next?

    • I was wondering that too, I won something in nov, but received it in Jan…received a late 1099 today for the winning in november..

  11. backslide says:

    Hi sweetie i’m on disability and don’t usually file taxes, but last summer won a PC worth 1499. do i need to file? they have not sent me a 1099 form or anything so wasnt’ sure if i did and if i do how i do that without the form.

  12. I won $2,000 in a sweepstakes. It was $1,000 for the grand prize and another $1,000 as the 2nd chance drawing two years ago. I received the 1st $1,000 but not the 2nd and the company reported $2,000 to the IRS that I have to pay tax on. Is there anything that can be done?

  13. Scherie stover says:

    Wendy, I just this morning got an email stating that I won a trip for 4 to the Little League World Series in PA (retail value $10,000) and 4 other people also won the same prize. Of the 5 of us, one of us will be given a key to a new minivan (retail value $40,000 or $45,000). My sister looked up taxes. And federal taxes is 30% and the state taxes in my state is 6.5%. So I figure that the trip will cost me $3600 and the minivan is over $18,000 in taxes to win. Am I looking at this wrong? It seems like a whole lot of money to win something, and I wouldn’t even figure that a trip to the little league world series in PA to be even worth $3600 let alone $10,000. I could take my family to Disney for that price. I figured I would email you for help since your the expert and have won many, many things. THANKS A MILLION for your site by the way

  14. Hi! I have won a travel sweeps worth (ARV) $26,000. And after reading many articles about paying taxes and all, I told the sponsors I had to decline from the grand prize. She wrote back saying that their CPA said I don’t have to claim anything and they would not send a 1099 to us, since everything is paid for and there is no cash prizes. Is that legit?? Thanks for any advice and your reply.

  15. Cheryl Thompson says:

    I won concert VIP tickets, there is no value on the tickets, so I can’t sell them.
    If no value is on them, why am I paying taxes on them? With W-1099

  16. CHELCEI EAST says:

    I WON OFF THE ELLEN DEGENERES SHOW ONE OF THE 12 DAYS OF CHRISTMAS VALUED AT $2650.00 JUST THIS YEAR IN 2015. SO, FROM WHAT I HAVE READ HERE IS I HAVE TO PAY THE TAXES ON THE PRIZE AMOUNT WON? BUT IF THOSE PRIZES ARE SHIPPED/RECEIVED IN 2016 I WILL PAY THOSE TAXES IN 2017 FORMS.?

  17. Excellent Article! I’ve read through the comments and did not see this question covered. I hope you can clarify this for me.

    Lets say you win a hotel stay for a specific date and $1,000 for airline tickets, and $500 in Gift cards (for meals, etc) . You accept the prize and then Life happens and you can’t go on the trip during the designated date. However they have already made the arrangements for you and gace you the gift cards and the $1,000 check. So you use the remainder of the prize to go somewhere else at a later date. ……. Do you have to claim the portion you did not use? In this case, the hotel stay.

    Thank You!

  18. People need to read the instructions on the current year’s 1040 tax form. It specifically says to read the chart in the instructions to see if you may be one of the people who don’t have to file taxes. For example, in 2016, it states that you would have to make something like 11,000 dollars give or take before you have to file if you are FILING SINGLE! If you can be considered a DEPENDENT on another’s taxes, then it’s something like only $300 or less before you have to file taxes. There is an A, B, or C this year. READ IT. Even if you were paid a couple of hundred by working in a “church,” it states THAT can trigger your encessity to file taxes. JUST READ THE INSTRUCTIONS AND THE SECTION THAT SAYS “DO I HAVE TO FILE A RETURN?” People who are not dependents make out much better winning prizes before they have to file a return on the winnings, and can make several thousand in cash and prizes before they have to even consider filing IF there are no other criteria that prompts them to have to do so.

  19. Hi so I enter a lot of blog giveaways and lately one sponsor/host added into the rules that you will need to fill out a tax claim form. I am unemployed and have been since 2013. I do not file taxes. If I win a prize of about $1000 in value, either an iPad and cannon rebel combo prize, macbook, or iMac, will the IRS actually expect me to pay taxes on one of those prizes? And if so about how much? Or could I just not file like I usually do. I don’t have income so I don’t want to even waste my time entering hers if I’ll actually wind up owing anything. Thanks for your help!

  20. i won sweepstakes prize 2015 one year, but sweepstakes actually ended the following year 2016, do i pay my tax this year 2017 since the sweepstakes officially ended summer 2016?

  21. Won a $5000 Best Buy gift card, but when I purchase something, they add tax to the amount they deduct from the card, so why do I have to pay tax on the $5000 when I don’t actually get to use The Whole $5000?

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