Do I have to pay tax on a prize or award?

If you win a prize or award in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include its fair market value in your taxable income and report it on your tax return. For example, if you win a $50 prize or award in a photography contest, you must report this taxable income on Line 21 of Form 1040.

However, if your award or prize meets all of the following four tests it is not taxable on your tax return:

	it is in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement;
	you do not have to perform services;
	you were selected without any action on your part;
	you assign the prize or award to a government unit or tax exempt charitable organization prior to your use of, or receipt of benefits from, the award. You can't claim a charitable tax deduction for the assignment on your tax return.

If you receive merchandise for a prize or award, you must report the fair market value of the prize or award as taxable income on your tax return.

If you refuse to accept a prize or award, do not include it in taxable income on your tax return.

Related tax information about a prize or award

Tax Directory Topics:
Income Related Questions and Answers

IRS publications about a prize or award:
For further tax information about a prize or award see Chapter 13 of IRS Publication 17,

Your Federal Income Tax. Please read this IMPORTANT Editor's Note regarding navigating IRS publications with Adobe Acrobat Reader.
IRS publications can also be ordered by calling 1-800-829-3676.

Customer Support

Still have IRS or tax questions?
To view the alphabetical Master Index of all tax and IRS topics click here.

Ask Julian Block your IRS and tax questions!

If you can't find the answer to your IRS or tax question in our web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine.

To call Julian for a tax consultation click here.

Prepare your IRS tax return and State tax return online - If you'd like to e-file and/or print your IRS tax return or State tax return online click here.