Taxes on Price is Right Prizes: How Do They Work?

Winning on The Price is Right is a dream for many, but it comes with financial responsibilities. The Internal Revenue Service (IRS) views all winnings, whether cash or merchandise, as taxable income. Before a contestant can enjoy their new car or vacation, they must account for the associated tax liability.

Determining the Taxable Value of Prizes

The foundation of your tax bill is the value assigned to the prizes you win. This figure is based on the prize’s Fair Market Value (FMV). The show’s producers determine the FMV, which for most items like electronics or furniture, is the Manufacturer’s Suggested Retail Price (MSRP). This means a prize is valued at its full retail cost, not a discounted price.

For example, if a contestant wins a new car, the taxable value will be its MSRP, not the negotiated price one might get at a dealership. A vacation package’s value is based on the total retail cost of the airfare, accommodations, and any included activities. This valuation is what the show reports to both the winner and the IRS.

A winner’s tax obligation is tied directly to this reported FMV. Even if a winner believes they could sell a prize for less than its stated value, the IRS considers the FMV as the income received. The value reported by the producers is the official number for all tax calculations.

Federal and State Tax Implications

Winnings from “The Price is Right” are taxed as ordinary income, meaning they are added to your other earnings for the year, such as wages from a job. This can have an impact, as a large prize package can push a winner into a higher marginal tax bracket. For instance, a person earning $60,000 annually who wins $50,000 in prizes will be taxed on a total income of $110,000, meaning a portion of their income will be taxed at a higher rate.

The tax situation is further complicated by state-level requirements. Because the show is filmed in California, all prizes are considered California-source income. Consequently, non-resident winners are required to file a California state tax return and pay California income tax on their winnings. Some past winners have reported a 7% withholding for California taxes that must be paid before prizes are shipped.

Winners also owe income tax to their home state on the same prize winnings. To prevent double taxation, a winner’s home state will typically allow them to claim a tax credit for the income taxes paid to California. This means that while you must file returns in two states, you generally do not pay full tax on the same income twice. Navigating this process requires careful record-keeping.

The Prize Acceptance and Reporting Process

After the excitement of a win, a contestant faces their first decision: whether to accept or decline the prizes. Rejecting a prize is a legitimate option that allows a winner to avoid any associated tax liability. This can be a practical choice if the tax bill on a prize is more than the winner is willing to pay.

For those who accept, the process begins with paperwork provided by the show’s production team, including an IRS Form W-9. This form provides the show with the winner’s Social Security number so they can properly report the winnings. Following the tax year, the show will send the winner and the IRS a Form 1099-MISC, detailing the total FMV of all prizes won.

This reported income must be included on the winner’s federal tax return. The amount from the Form 1099-MISC is typically reported on Schedule 1 of Form 1040 as “Other income.” Because this additional income can result in a substantial tax bill due the following April, winners may need to make quarterly estimated tax payments to the IRS and their state tax agency. These payments help cover the tax liability throughout the year and prevent potential underpayment penalties.