Joshua: How do you pay taxes on prizes that exceed your yearly income?
Say that you win over $ 100,000 worth of prizes (not cash), how would you pay taxes on that. Say that you make only $ 30,000 per year how would you be able to pay that. It’s not fair that people have to pay taxes on physical items especially since the item has already been taxes. It’s like the government robs us from out money and someone should put a stop to that because in my opinion that’s a double tax.
Answers and Views:
Answer by Rinkydink
What makes you think the prize is being double taxed? Prizes are generally donated to the cause sponsoring the raffle or project. Do you believe an automobile, being offered as a prize, was purchased by the organization offering the prize and paid for it including taxes? No, it was not and the winner is obliged for the taxes. Often in lieu of the car a cash payment will be made and the winner has to include this as income and pay the taxes on it. You are wrong about double taxation and prizes are considered income and taxable as they should be.
1. Sell the prize and use some of the proceeds to pay the income taxes.
2. Refuse the prize and pay no tax at all.
Where do you get the idea that “the item has already been taxes?” The prize is income to YOU and YOU must pay income taxes on it. End of story.
Answer by the kidYou would save some of the money in anticipation of having to pay the taxes.
“It’s not fair that people have to pay taxes on physical items especially since the item has already been taxes” – when else were you taxed on the item? Say you win a car… when were you taxed on it other than on your income tax return when you claim the prize? You didn’t pay tax on it when they gave you the prize. So you get taxed one time.
If you can’t afford the taxes, you sell the item and use the money to pay the taxes and buy one you CAN afford.
Answer by kelby7670You put the value on form 1040 line 21.
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