Are Raffle Tickets Tax Deductible? What You Need to Know

Buying raffle tickets to support a charity or nonprofit can feel generous, but at tax time, you might wonder if that purchase qualifies for a deduction. While donations to qualified organizations are typically deductible, the rules change when there’s a chance to win something in return.

Understanding how the IRS treats raffle ticket purchases is important to avoid mistakes on your tax return.

Distinction Between Contribution and Chance

The IRS differentiates between a charitable contribution and a transaction where the buyer receives something in return. Buying a raffle ticket isn’t a donation—it’s a purchase for a chance to win. This distinction matters because tax-deductible donations require that the donor receive nothing of value in exchange.

A true charitable contribution is a voluntary transfer of money or property without expecting anything in return. Donating $100 to a qualified nonprofit without receiving anything is generally deductible. In contrast, a raffle ticket purchase provides a potential benefit—the opportunity to win—making it more like a lottery or gambling expense.

This applies across different fundraising events. Whether a school sells raffle tickets for a gym or a hospital foundation offers a luxury car giveaway, the presence of a prize means the payment isn’t a deductible donation. Even if the ticket price exceeds the fair market value of the prize, the entire amount remains a non-deductible purchase.

Deduction Eligibility Criteria

For a payment to be deductible as a charitable contribution, the recipient organization must be a tax-exempt entity under Internal Revenue Code Section 170(c), such as a 501(c)(3) nonprofit, religious institution, or certain government organizations. However, purchasing something from a nonprofit doesn’t automatically make the expense deductible. The nature of the transaction determines deductibility, not just the recipient’s tax status.

Even when donating to a qualified organization, the IRS requires that the contribution be voluntary and without substantial benefit to the donor. If a payment provides a direct benefit, such as access to an event, goods, or services, only the portion exceeding the fair market value of what’s received may be deductible. For example, if a nonprofit sells dinner tickets for $200 and the meal is valued at $75, the remaining $125 could be deductible.

For donations of $250 or more, donors need a written acknowledgment from the organization specifying whether they received anything in return. If goods or services were provided, the statement must describe them and estimate their value. Without this documentation, the deduction could be denied in an audit.

Documenting Ticket Purchases

Since raffle ticket purchases aren’t tax-deductible, they shouldn’t be included with other charitable contributions when organizing tax documents. Instead, they should be categorized separately, especially if supporting multiple fundraising events throughout the year. Clear records help prevent misreporting and ensure compliance.

Keeping copies of raffle tickets, receipts, or confirmation emails from the organization can help maintain proper records. These documents should include the date of purchase, amount paid, and the organization’s name. If tickets are bought online, saving digital transaction confirmations provides a reliable backup.

For individuals who regularly support nonprofit events, tracking raffle ticket purchases helps manage discretionary spending. Businesses that buy raffle tickets as part of corporate sponsorships or marketing efforts may also need to document these transactions for internal accounting, even if they aren’t deductible. Proper documentation ensures financial transparency and accurate budgeting.

Itemizing on Tax Returns

Deciding whether to itemize deductions or take the standard deduction depends on whether total eligible deductions exceed the standard deduction amount, which for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly. Since raffle ticket purchases aren’t deductible, they don’t contribute to the total that would justify itemizing. Instead, taxpayers should focus on other deductible expenses like mortgage interest, state and local taxes, medical expenses exceeding 7.5% of adjusted gross income, and qualifying charitable donations.

For those who itemize, Schedule A (Form 1040) is used to report deductions. Charitable contributions are listed separately, and documentation requirements are strict. The IRS requires written acknowledgment for contributions of $250 or more, and non-cash donations may require Form 8283. Mistakenly including raffle ticket purchases as charitable deductions could trigger an audit adjustment, leading to penalties and interest on underpaid taxes.

Prizes and Taxable Winnings

Winning a raffle may feel like a lucky break, but the IRS treats prizes as taxable income. Whether the reward is cash, a car, a vacation package, or another valuable item, it must be reported on your tax return. The organization running the raffle must issue a Form W-2G if winnings exceed $600 and are at least 300 times the ticket price. Even without a W-2G, winners are responsible for reporting the income.

For non-cash prizes, the taxable amount is based on fair market value. If you win a $50,000 car, that full amount is considered income, and taxes must be paid accordingly. Federal withholding of 24% may apply immediately if the prize exceeds $5,000, meaning winners often face a substantial tax bill before receiving their prize. State taxes may also apply, depending on residency. Some states have a flat tax rate on gambling winnings, while others treat them as ordinary income. If a winner later sells the prize, any gain or loss from the sale could have further tax implications, requiring careful record-keeping.