Prizes and Awards
If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $50 prize in a photography contest, you must report this income on Schedule 1 (Form 1040), line 8i. If you refuse to accept a prize, don't include its value in your income. Prizes and awards in goods or services must be included in your income at their FMV.
Employee awards or bonuses
Cash awards or bonuses given to you by your employer for good work or suggestions must generally be included in your income as wages. However, certain noncash employee achievement awards can be excluded from income.
Prize points
If you're a salesperson and receive prize points redeemable for merchandise that are awarded by a distributor or manufacturer to employees of dealers, you must include their FMV in your income. The prize points are taxable in the year they're paid or made available to you, rather than in the year you redeem them for merchandise.
Pulitzer, Nobel, and similar prizes
If you were awarded a prize in recognition of accomplishments in religious, charitable, scientific, artistic, educational, literary, or civic fields, you must generally include the value of the prize in your income. However, you don't include this prize in your income if you meet all of the following requirements:
- You were selected without any action on your part to enter the contest or proceeding.
- You aren't required to perform substantial future services as a condition for receiving the prize or award.
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The prize or award is transferred by the payer directly to a governmental unit or tax-exempt charitable organization as designated by you. The following conditions apply to the transfer.
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You can't use the prize or award before it's transferred.
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You should provide the designation before the prize or award is presented to prevent a disqualifying use. The designation should contain:
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The purpose of the designation by making a reference to section 74(b)(3);
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A description of the prize or award;
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The name and address of the organization to receive the prize or award;
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Your name, address, and TIN; and
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Your signature and the date signed.
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- In the case of an unexpected presentation, you must return the prize or award before using it (or spending, depositing, or investing it, etc., in the case of money) and then prepare the statement as described in (b) above.
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After the transfer, you should receive from the payer a written response stating when and to whom the designated amounts were transferred.
Note: These rules don't apply to scholarship or fellowship awards.
Additional Information:
Is the Prize or Award I Received Taxable?
TaxSlayer Pro strives to make the information on this page timely and accurate but makes no promise or guarantee about the timeliness, accuracy, or completeness of the contents of this page. This is general information and is not intended to be tax advice. You are encouraged to also review the underlying federal resources and publications.