Taxes on Game Show Winnings, Lottery and Online Gaming

Winning taxes are considered ordinary income by the U.S. federal government. This is regardless of the amount won from prizes, awards, sweepstakes, raffles, lotteries, or similar income sources. But how much tax do you pay from your prize? Read on to know!
game-show
Taxes on Game Show Winnings, Lottery and Online Gaming
Winning at least $600 is likely to result in a 1099-MISC tax form being sent by the awarding entity to both the winner and the IRS. If no form is received, the winner is still obligated to report the winnings value.
In this article

Don’t worry, it’s not all bad news. We’ll go over the ins and outs of how game show winnings work and make sure you’re fully prepared for when lady luck comes knocking.

Taxes on Game Show Winnings

Winning taxes are considered ordinary income by the U.S. federal government. This is regardless of the amount won from prizes, awards, sweepstakes, raffles, lotteries, or similar income sources. This holds even if the winner did not actively participate in the contest. State taxes may also apply, except in states that don’t have a state-level income tax. 

Winning at least $600 is likely to result in a 1099-MISC tax form being sent by the awarding entity to both the winner and the IRS. If no form is received, the winner must still report the value of the winning. Merchandise won is also subject to taxation.

The amount of tax owed depends on the winner’s place of residence and the amount won. Federal taxes must be paid. However, some states without an income tax may provide some relief.

How Much Will be Taxed?

  1. IRS taxation of the game show winnings in the US:
  • A 1099-MISC form will likely be sent to you and the IRS by the awarding entity if your winnings are at least $600.
  • The IRS imposes a 30% withholding tax on the gross value of the prize, similar to lottery winnings.
  1. Reclaiming withholding tax for non-US residents:
  • Part or all of the 30% withholding tax may be recovered by offsetting it with gaming losses incurred in the same year.
  • Involves navigating the US tax system and filling out the appropriate forms, such as Form 1040NR and 1042-S.
  • Requires providing US gaming documentation from the same calendar year.

Non-cash Prize Game Show Winners

Winning non-cash prizes can come with some unwanted consequences, like having to pay taxes on their fair market value. But here’s the catch, game shows often value prizes at the highest retail price, not what it would actually sell for.

For instance, a trip could be valued at top dollar, not the discounted rate you could get from a travel agent or online. 

This could leave the winner with a huge tax bill they can’t afford and penalties from the IRS if they can’t pay it. To dodge this issue, one option is to decline the non-cash prize, or if it’s something easy to sell, sell it (but not to a relative or friend). But beware, if you plan on reselling the item, you might end up paying taxes on a value you can’t recoup, leaving you with less profits.

Taxes on Gambling Winnings

Winnings from game shows and gambling must be reported to the IRS as income. However, there is a silver lining for those who participate in the lottery or casino gambling. If you end up with a net win, you can deduct your losses, but only under certain conditions. To qualify, your winnings must exceed your losses.

For example, if you spent $200 on lottery tickets and won $4,000, only $3,800 would be considered taxable income. To take advantage of this deduction, you must itemize your deductions using Schedule A on your tax return. Keep all relevant documentation, such as lottery tickets and casino receipts, in case of an audit.

Taxes on Game Show Winnings [US State Wise Table]

StateFederal Tax RateState Tax Rate
Alabama10-37%2-5%
Alaska10-37%0%
Arizona10-37%2.99-3.5%
Arkansas10-37%1-5.9%
California10-37%1-13.3%
Colorado10-37%4.55%
Connecticut10-37%3-6.99%
Delaware10-37%0%
Florida10-37%0-5.5%
Georgia10-37%0-6.75%
Hawaii10-37%4.95-5.4%
Idaho10-37%1-7.6%
Illinois10-37%4.75%
Indiana10-37%3.30%
Iowa10-37%0.78-5.7%
Kansas10-37%2.25-5.5%
Kentucky10-37%5-6%
Louisiana10-37%2%
Maine10-37%5.75-8.9%
Maryland10-37%5.75%
Massachusetts10-37%5.10%
Michigan10-37%4.25%
Minnesota10-37%2.85-9.85%
Mississippi10-37%3-5%
Missouri10-37%5.40%
Montana10-37%1-6.9%
Nebraska10-37%3.46%-6.84%
Nevada10-37%0%
New Hampshire10-37%5%
New Jersey10-37%1.75-8.97%
New Mexico10-37%1.70%
New York10-37%6.85-8.82%
North Carolina10-37%5.50%
North Dakota10-37%2.90%
Ohio10-37%3.30%
Oklahoma10-37%2.55-5.25%
Oregon10-37%0%
Pennsylvania10-37%3.07%
Rhode Island10-37%3.2-6.2%
South Carolina10-37%3-6.9%
South Dakota10-37%0-4.6%
Tennessee10-37%0-6.75%
Texas10-37%0%
Utah10-37%1.455-5.955%
Vermont10-37%3.33%-8.95%
Virginia10-37%2-5.75%
Washington10-37%0%
West Virginia10-37%3%
Wisconsin10-37%4.84%
Wyoming10-37%2-3.9%

Tips to Manage Game Show Winnings

  • Pay taxes: Remember to pay any applicable taxes on your prize as soon as possible to avoid penalties.
  • Choose cash over objects: If you have the option, choose cash instead of an object. If you win a $15,000 vacation, ask if you can have the money to avoid paying a large tax bill on a supposedly ‘free’ trip.
  • Know the true value of your prize: The entity giving you the prize may inflate the value for their benefit. Make sure you know the true value and contest it if necessary.
  • Consider declining a prize: If you win a prize that comes with a large tax bill, consider declining it if you are not financially able to pay the taxes. The real reward may come from walking away.
  • Use cash prizes to cover tax bills: Cash prizes can cover associated tax bills. But it may not be worth the trouble if you have to scrounge for cash to pay the taxes on objects or vacations.

It’s a good idea to speak with a tax professional to determine if estimated tax payments are necessary. The payer may not need to withhold income taxes from your winnings. However, once the tax implications are taken care of, you may still have enough winnings left to shop.

What is the tax rate on game show winnings in California?

Game show winnings are considered ordinary income in California, which means they are taxed at your regular income tax rate. The California income tax rate ranges from 1% to 13.3%, depending on your taxable income.

In addition to state income tax, you will also be responsible for paying federal income tax on your game show winnings. The federal income tax rate ranges from 10% to 37%, depending on your taxable income.

Here is a table showing the estimated tax rates on game show winnings in California for different taxable income levels:

Taxable IncomeCalifornia State Income Tax RateFederal Income Tax RateTotal Tax Rate
$0 to $11,0001%10%11%
$11,001 to $14,9502%12%14%
$14,951 to $19,8003%12%15%
$19,801 to $25,0504%12%16%
$25,051 to $31,5505%22%27%
$31,551 to $42,7506%22%28%
$42,751 to $53,7008%22%30%
$53,701 to $65,4509.30%22%31.30%
$65,451 to $107,35010.30%24%34.30%
$107,351 to $150,00011.30%24%35.30%
$150,001 to $328,70012.30%32%44.30%
$328,701+13.30%37%50.30%

Please note that this is just an estimate, and your actual tax liability may vary depending on your individual circumstances. You should consult with a tax advisor to get a more accurate estimate of your tax liability.

FAQ

Q: If you win a Million Dollars on a Game Show, How Much is Taxes

A: If you win a Million Dollars on a Game Show, You can expect to pay around 30-40% of your winnings in federal taxes.

Q: If you win $10000 on a game show how much is taxed

A: If you win $10000 on a game show, you can expect to pay around 25-37% of your winnings in federal taxes.

Q: Do you have to Pay Taxes on Wheel of Fortune Winnings

Yes, you do have to pay taxes on Wheel of Fortune winnings. All game show winnings, including those from Wheel of Fortune, are considered taxable income by the IRS. The amount you owe will depend on your income tax bracket and state of residence.

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Thejaswini MA

Thejaswini MA

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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