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Velvetwriter
January 2nd, 2007, 5:36pm
As I'm not very good with taxes, I was just wondering what the standard rule is for how much a prize will cost you after you claim it. Is it different for money won versus a large prize won?

9ilovetowin2
January 2nd, 2007, 6:19pm
Prizes are taxed as ordinary income ("other income" line 21 of the 1040)."How much" depends on which tax bracket you are in. (which will depend on your total income- adjustments-deductions and exemptions) If you won anything other than cash you would use the Fair Market Value amount- there is no difference in how the tax is computed.
Consult with your Tax Advisor :)

quiltfisher
January 2nd, 2007, 6:28pm
Regarding fair market value: Can I use what an item sold for on eBay as fair market value? Or does the FMV have to be from a retailer?

Skipper
January 2nd, 2007, 6:29pm
Don't forget your state income tax, too, if any.

epiphany327
January 2nd, 2007, 6:29pm
Wish I had somethng to claim :frown3:

Full Monte Carlo
January 2nd, 2007, 6:37pm
I won over $32,000 in prizes that I had to claim in 2005 and I owed $6,200 to the IRS this past year. I was able to claim about $1,000 as lost income so if I wouldn't have had that I would have had to pay $6,300, was a hard check to write and that was only federal that didn't include my state taxes, I can't remember what I owed them.

caseycupcake
January 2nd, 2007, 6:45pm
Regarding fair market value: Can I use what an item sold for on eBay as fair market value? Or does the FMV have to be from a retailer?

I'm not an accountant, but this is my interpretation of FMV according to the IRS.

The FMV is not what an item sells for but what most people would accept as a reasonable price for an item. Lets say you are selling a new 6 foot leather couch. Some retailers might sell it for $1200 up to $6000. Who knows. You sell yours on ebay--there isn't much bidding and you get skunked and end up selling it for $300. $300 is NOT the FMV although some lucky guy buys it for that price. The FMV is what a survey of people would spend on that item if they were in the market for it. So the FMV may be $1100 to $1500 for that couch.

Now if you win a plasma TV from Circuit City, they might claim that TV has an ARV of $6000. But if you have their ad and they are selling them for $4500 then I think you can use that figure since they were the ones giving away the item.