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Winning big on a game show isn’t all rosy. Read on to see why a large prize could mean a huge tax bill.
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When my brother got tickets to be in the audience of The Price Is Right, he figured it would simply be an entertaining way to spend a day off. He didn’t imagine his name would actually be called during the show’s opening round.
But lo and behold, my brother was one of the first four contestants asked to come on down and participate in the iconic show that has you guessing at prices of various consumer goods. And as luck would have it, my brother was able to out-bid his competitors and move on for a chance at a new car — a car he won through savvy guessing, but also, a nice amount of luck.
My brother was ecstatic to have won such an awesome and valuable prize. But that prize wound up being a bit of a mixed bag.
Taking the money and running
My brother won a Hyundai Elantra with an estimated value of $25,415. He was happy to have won the car, but there was a problem — he already had a vehicle and didn’t need a second one. And he certainly didn’t want to have to bear the cost of auto insurance for a vehicle to largely just sit in his driveway.
Thankfully, my brother was able to work something out with the dealership. Instead of keeping the Elantra, he was able to use the roughly $25,000 credit he got to buy a used car from them and then sell it back for $21,000, which he took as cash. This route was worth it for him because sales tax and registration for a new Elantra would’ve been about $4,000. And now, my brother has a pile of cash he can add to his savings account instead of a car he doesn’t actually need.
Gearing up for a giant tax bill
My brother won two prizes on The Price Is Right — a grill package worth about $1,400 and the Hyundai Elantra. All told, it’s more than $26,000 in winnings.
But now, my brother is going to be looking at a pretty hefty tax bill on his prizes. And it doesn’t matter that he took cash for the car. He’s looking at paying that tax either way.
Now the exact amount will hinge on his total tax situation. What’ll probably happen is that my brother will receive a tax form from the game show summarizing the value of his winnings, and he’ll need to work with his accountant to figure out what it will cost him.
The good news is that my brother stands to gain something financially either way. But imagine you were to receive a $26,000 bonus from work. That’s a great thing. But you might end up effectively losing a large chunk of that $26,000 when you account for the portion you owe the IRS.
All told, my brother is grateful for his experience and now has a really fun story to tell. But if you’re planning to audition for a game show in the hopes of walking away with a huge amount of cash or a set of prizes, do know that winnings like that are considered taxable income. And it might take the input of a very seasoned accountant to help you reconcile your tax bill after coming away with that sort of haul.
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