“The trick is just treat it as a fun experience ... it doesn't hurt to watch a show occasionally because there are strategies involved.” Contestants regularly win enormous sums of money, expensive cars, and trips around the world.
It turns out that there is a reason the prizes might feel unrealistic: winners end up paying taxes on everything they take home from their TV experience. CinemaBlend explored the case of Wheel of Fortune winner Matt McMahan, who walked away with over $16,000 in cash and two trips worth more than $15,000.
The show does allow winners to find less expensive versions of their trips to avoid a higher tax hit. If you’ve ever dreamed of running the board on Jeopardy, besting the bonus round on Wheel of Fortune or making it to the Showcase Showdown on The Price is Right, make this part of your fantasy, too: taxes.
Take charge of your financial life right now How much tax you pay depends on where you live and how much you win. You might make considerably more than your normal annual salary in the year you win big.
Let’s say you win $25 million in the lottery in New York City, where you live. The lesson: When you win prizes that are not actual money, it’s important to know exactly what their monetary values are.
If you win a noncash prize, you might end up owing more in taxes than you can afford. This can become a real headache because if you accept the prize and then can’t pay the taxes on it, you could face serious penalties.
You may decide to sell the item in order to pay the taxes and then keep the rest of the money as profit. In some ways, they face similar fates: both are income you must report to the IRS.
So if you spent $300 in lottery tickets and won $3,000, only $2,700 is taxable income. When you file your tax return, you’ll need to itemize (which means using Schedule A when you file your taxes) and you’ll need to be able to substantiate your gambling losses if you’re audited, which means keeping every lottery ticket and casino receipt.
It may be a good idea to pay estimated taxes right away on what you win to avoid any possible penalties later. That’s because you could owe thousands in taxes, which is a lot of cash to come up with for a supposedly “free” vacation.
You may be better off taking the money and then using it to pay for a smaller, more affordable trip. The entity giving you the prize may slightly inflate the value in order to entice more people to compete or to create a larger tax deduction for itself.
Don’t be afraid to turn down a prize if might become a tax burden. Maybe you can sell it and come out ahead, but it’s important to be realistic and not let shiny objects blind you to tax consequences.
Unlike the game of life, whose arbitrary rules might screw with you like an overzealous power drill, game shows make people feel like they have a chance to prosper in the face of drastically stacked odds. Maybe you'll win a car if you're good at feuding with families or great at answering random questions.
The amount you pay will also depend on the tax code, which changes pretty regularly. For instance, as of 2018, game show contestants can no longer claim tax deductions for airfare, hotel fees, and other expenses related to their game show attendance.
In that regard, the winners of today pay higher taxes than their game show predecessors, and the winners of the future may pay even more (or less) as tax laws evolve. Since 1975, contestants on Wheel of Fortune have been buying vowels and solving puzzles to win a variety of prizes, from trips and cars to even $1 million in cash.
But when it comes to the hangman-style word game, taking home the big bucks is a lot harder than it watches on TV. But even the luckiest wordsmiths can't escape the state and federal taxes that go along with their Wheel of Fortune winnings, no matter the sum.
That means you might win $1 million on the show, but sadly that's not nearly how much you're taking home at the end of the day. You then have to win the game, and make it to the bonus round without ever hitting the bankrupt penalty wedge, which would immediately wipe out your million-dollar prize.
The contestant then has to spin for a prize envelope, essentially requiring the individual to land on the $1 million wedge again. In some states, based on the percentage of income tax and the possibility of being put into a different taxable income bracket based solely on your winnings, a $1 million winner could end up giving half of the prize money right to the IRS (via NerdWallet).
A lot of people would kill to get a shot at being on Wheel of Fortune ; you answer a few questions right and suddenly you're walking away with several thousand dollars. Most people probably think that winning on a game show like Wheel of Fortune is a dream come true; suddenly you have a ton of cash you hardly had to do any work for at all.
This means, of course, that winners don't just walk away with their pockets lined with a thousand dollar bills when they rack up the prizes on a program like Wheel of Fortune. Matt McMahan, who taped an episode of the show in July which just aired as the Season 34 premiere on September 12, walked away with $31,700 in cash and prizes, but he's definitely not going to be able to put that much into his bank account.
First, along with $16,400 in actual cash, Matt McMahan won two trips worth a total of $15,300 (a cruise down the Danube River which could take him through up to 10 countries, and a vacation to Chile). Adrienne Jones View Profile Bachelor Nation, Gilmore Girl; will Vulcan nerve pinch pretty much anyone if prompted with cheese... Yes, even Jamie Fraser.
Although the winnings from a game show can change a lucky winner’s life instantly, their after-winning-life might not be as splendid and impressive as most of us think. The truth is, game show winnings are always a two-sided coin and often a suckers bet in my opinion.
It’s something that you’ll never hear a game show’s host mention on TV, but you can always count on, that the IRS will always come for their share! Yes, In the United States, winners have to pay game show prize taxes.
This is basically because the government views game show winnings as taxable income. Here’s a quick summary of the article: After winning any game show or contest, you’ll sign some paperwork and agree that you’re going to pay taxes on the prizes.
When it’s all said and done, the winner will most definitely get a 1099-MISC tax form from the show’s organizers, who are also obligated to send a copy to the IRS. If you, however, live in states that do not have income taxes such as Washington, Nevada, Texas, Alaska, Florida, South Dakota, and Wyoming, you may not have to pay state taxes on your game show winnings.
There are a few occasions when you can avoid paying game show prize taxes. For instance, game show winnings and other 1099 based income that are worth below $600 are not taxed by the IRS.
Recently I had a conversation my CPA about whether someone is better winning cash or an actual prize. Wheel of Fortune is famous for giving cash prizes and vacation trips.
The value of those trips will be counted as income for you, I recently read an article on Smartwatch which tells exactly what can happen. Show organizers may inflate the value to entice more participants or to reduce their tax obligations.
Even though visions of Alex Greek and Daily Doubles dance in my head, I do know that winning Jeopardy will never be my path to riches. Because even if I were able to pull of the kind of streak that Ken Jennings did, I wouldn’t be able to take home all the money I earned.
Savvy game show winners elect to have taxes deducted from their winnings, although that doesn’t necessarily take care of every potential problem. For instance, your tax return is going to be more complicated after a win, so you might need to pay for help filing it correctly.
But what if you win a new car, a trip to Machu Picchu, or a lifetime supply of chocolate pudding? So you’re faced with the option of either walking away from your prize, or scrambling to pay the tax bill on your new car.
If you dream of showing off your trivia knowledge, your ability to guess the prices of retail items, or your hangman-playing skills, plan on doing it for the experience rather than what you could win.