how much taxes will I have to pay to claim a prize worth $2500?
Asked by: megan
So how is taxes for prizes accounted for? Does the value of the prize go towards your income, or is it a fixed rate tax like a sales tax? It is for an item worth about $ 2500 and the company holding the contest has reported my award to the IRS.
Ok thank you to those that responded and I understand it’s basically based on my income and what bracket that will fall into. Basically I’m claiming it for someone who actually won it but is overseas and I will give to them, but I’m wondering if I should just tell them to pay me whatever taxes I think I will owe on it. Ex. 20% effective tax rate is what my turbo tax showed me, so maybe I could ask them for $ 500. Thanks again and please don’t spend too much time answering this.