How are sweepstakes winnings taxed is a question that many participants overlook when entering contests. In general, winnings from sweepstakes are considered taxable income by the Internal Revenue Service. This means that if you are fortunate enough to win a prize, whether it be cash or merchandise, you are required to report the fair market value of the prize on your tax return. Depending on the amount won, you may also be subject to additional taxes. It is crucial to keep detailed records of your winnings and any related expenses to ensure compliance with tax regulations and avoid surprises at tax time.
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