As luck would have it, you might win something on a game show. These prizes can and likely will be taxed. When and how they're taxed, rely on many things, like where you live, how much the reward is worth, and how much you make. Because the prize was not sold to you, you probably won't have to pay sales tax on it. This doesn't mean that you will be able to enjoy your Wheel of Fortune prizes completely tax-free. So how much do you pay taxes game show winnings?
Taxes: Awards from Game Shows
When you win a prize on a game show, the IRS and some states will tax it like any other income. It doesn't matter how much money you won from a game show for tax purposes. Your prize is money. And as a result, you may have to pay state and federal income taxes on it depending on how much your prize is worth, how much it costs to make, or how much it is worth on the open market. Those who win prizes are taxed according to their standard income tax rate or bracket.
You should get an IRS Form 1099-MISC, Miscellaneous Income if your prize is more than $600. The game show should report your prize money to the IRS and give you the form. This form is usually sent to people who win on game shows. If for some reason, you don't get it, though, you still have to report your winnings on your federal tax return. However, if the value of the prize is more than $5,000, you will have to pay federal taxes of 24%, no matter if it is a cash prize or something else.
How Much Tax Will You Pay After You Win Money?
There is a good chance you will make a lot more money in the year that you win a lot of money. That could raise your tax rate. There is a lotto in New York City, where you live. Let's say you win $25 million there. City and state taxes add up to about 12.7%. Thirty-seven percent top rate for federal taxes, and you could end up paying close to half of your winnings in taxes if you add that to the 37 percent. This is also usually the case when someone wins a game show. However, the state is what makes the difference. A lotto win in some states isn't taxed.
What Would Happen If You Won A Trip, A Car, or Maybe Something Else Than Cash
Prizes on a game show aren't free. There is a game show tax you have to pay. Rewards have value in money. For example, let's say that you win a trip to Mexico worth $10,000. To be ready to report that $10,000 and pay taxes on it, you should think about it. The lesson is that when you get something that isn't money, it's essential to know how much money it is worth.
If you get a non-cash prize, you might have to pay more in taxes than you can afford to do so. You might get in trouble if you accept the award and then don't pay the taxes on it. The item could be sold to pay the taxes, and then you could keep the rest of the money as a profit.
You Must Document Your Game Show Prize
The process of reporting your game show prize is pretty simple. The IRS Form 1099-MISC doesn't matter if you get one for your winnings or not. You still have to report it on your income tax return. Do this on Schedule 1, Additional Income and Changes in Income, and attach it to the new IRS Form 1040. To make things easier and faster for the tax year 2018, there is now just one shorter, more efficient version of this form instead of two separate ones.
Summary
When you win a prize on a game show, the IRS and some states will tax it like any other income. It doesn't matter how much money you won from a game show for tax purposes. Your prize is money. And as a result, you may have to pay state and federal income taxes on it depending on how much your prize is worth, how much it costs to make, or how much it is worth on the open market. Those who win prizes are taxed according to their standard tax bracket or income tax rate.
