Even if we win something (i.e. money, a car, etc), why do we need to pay taxes on our winnings?

chrstnwrtr: Even if we win something (i.e. money, a car, etc), why do we need to pay taxes on our winnings?
Say for example, I won a car on the Price is Right. Even though I won something, why should I have to pay taxes on something that is now rightfully mine?

If I win $ 1 million on some dopey reality show, why should I have to pay 50% to the feds? I won that money and I shouldn’t have to pay a dime to the feds.

Answers and Views:

Answer by SmartA$ $
same question regarding my paycheck?

Answer by Gem
For the same reason that when a husband dies, the wife can be penalized and have her home and assets fall within the death tax (which is 50%).

But the highest tax bracket the US has for personal taxes is 38%, due to the way taxes are figured you will ultimately pay a little less than 38%. Plus state taxes if applicable.

We ask the government to babysit us, then we wonder why we pay so much.

I know why.

Answer by Bob F
Because that money is income and the government affords to provide the services they do by taxing all of our income, whether it is from a job, from a business, from renting out a house, from interest and dividends, from winning a contest, or any other income.

Answer by Charles G
The income tax is a tax on income. If you win something, that is income.

You would be paying closer to $ 350,000 to the feds, or a bit less, if you won a million dollars. You would also have to pay the state something in the 43 states that also have an income tax.

If you won a million dollars, you are one of the “rich” that politicians so like soaking with tax.

Answer by Wayne Z
Because is the law.

All income, unless specifically exempted, is subject to income tax.

Answer by bostonianinmo
Simple, really. The LAW says you must. If you don’t want to pay the tax, you are free to refuse the prize.

BTW, you wouldn’t pay any more than 35% to the IRS as that’s the maximum tax bracket. Even adding in taxes for the State with the highest tax rates will still be less than 50% total for taxes.

Answer by src50
Because that is the law.

Answer by travelguruette
It is all income. IRS wants their piece. You can write off the gambling losses (proveable) against the winnings.

Answer by Judy
You don’t pay 50%. But a prize is legally taxable income, so by law you have to pay income tax on it.

Answer by kate
The government taxes income , ALL income , not just wages .
They don’t care if you worked for it or won it .
But personally , given my veryyyyy hard work . . .
I think they should only tax people who win stuff and didn’t have to work for it !
They shouldn’t tax us hard workers !

So , but what your saying is if I don’t work for it I shouldn’t pay taxes ?
Like , If I bought a stock for $ 50 and sold it for $ 100 ,
I could claim it was a winner and not pay taxes ?

Many people on games shows have discovered they could Not afford to pay the taxes and sold the items .
They are ahead the difference between the sale & the taxes .

Even those needy people on the Home Makeovers with Ty have had to pay taxes on the new homes value .
And That is a Lot of cash to have to come up with in 1 year !

Answer by stephenweinstein
I think the opposite question would make more sense. If I WORK HARD to earn money, that money “is now rightfully mine” and I have to pay tax on it. If I then buy a car with the money that I have left (after paying the income tax), I must pay another tax (sales tax) on the car that is “rightfully mine” because I paid for it. Why should you not have to pay tax on something that you received for free doing much less work (if any) than I did?