Are Prizes and Awards Taxable?
January 7, 2009
As I was entering the HGTV Dream Home Giveaway (the only sweepstakes that I enter regularly, can’t help it, these homes are so beautiful!), I wondered how I would pay the taxes if I actually won.
According to the IRS, awards, prizes, contest winnings and gambling proceeds (including lotteries) are taxable income which must be reported on Form 1040. Which means if I am lucky enough to win the gorgeous HGTV Dream Home in Sonoma California, then I have to come up with the money to pay taxes on the value of the home and other prizes included. Bummer, huh?
If you win a cash prize, such as gambling winnings or the lottery, sure it’s a bummer to pay the taxes, but at least you have the cash to do so.
When you win a non-cash prize, such as a vacation, a new car, or a house (such as in the case of the HGTV Dream Home Giveaway), then paying the taxes is an even bigger challenge because you have to come up with the cash to do so.
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Year End Tax Tips
November 29, 2008
It’s hard to believe we’re almost at the end of the year already. As I write this, there are only a few weeks left in 2008.
Most people probably aren’t thinking about taxes yet, but the time to do tax planning is before the year ends. Once December 31 has passed, there’s very little you can do to help reduce your 2008 taxes.
The first step in tax planning is to determine where you are for the year. Pull out last year’s tax return for a reference. You also need your most current profit and loss statement, so if your books aren’t up to date, now’s the time to get caught up.
Compare your income and expenses to last year’s tax return. Is your income up? Do you have the same amount of deductions as last year? If your income is up, or if your expenses were down, you may owe more taxes than you did last year.
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