Q:

How do you find tax rates on contest winnings?

A:

Quick Answer

The Internal Revenue Service publishes the tax rates on contest winnings on its website. As of 2015, the United States has seven tax brackets, and contest winnings that are subject to the maximum tax rate would cause the winner to owe nearly 40 percent of her total winnings, plus a base figure of nearly $120,000, according to the IRS.

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How do you find tax rates on contest winnings?
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Full Answer

Contest winnings are subject to taxation on the same basis as the rest of the winner's earned and unearned income of the year in which she won the contest, according to Zacks Investment Research. To calculate the entire amount of taxable income, the winner can add the year's taxable income from her salary and miscellaneous income sources to her contest winnings. On her tax form, the winner would designate the amount of her contest winnings as "other taxable income." The company issuing the prize provides the winner a 1099 form specifying the amount of the prize.

In addition to the amount due to the federal government, a contest winner is also subject to taxes in her state of residence, states Zacks. The tax amount due to the governments of each state varies. A taxpayer can contact the department of revenue of her particular state to find the specific amount due given her taxable income, including any contest revenue.

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