You win some, you lose some


 photo credit: ColumbusCameraOp

I was thrilled this week when I won an amazing prize package from a local Apple dealer as part of their Grand Opening. I won a MacBook Pro, hard drive, printer, and other accessories.

The feeling of euphoria I had quickly faded as my mind drifted to the tax implications. What can I say I’m the daughter of a CPA, and a personal finance writer. I knew there was a price to be paid.

A quick google search, and I realized that I would owe taxes on my precious prize. Based on last year’s taxes about 25% of my winnings. Ouch.

Taxes, taxes everywhere

Researching the taxes on my prize made me realize there are many times you would likely be taxed for a prize, or things you might not expect.

You are required to report and pay taxes on:

lottery winnings: This is one I don’t want to win, since lottery winners often end up bankrupt.
giveaways: like my prize, a prize of tickets to see a show, swag, etc.
prizes: anything you earn for winning a contest, just ask Richard Hatch
host/hostess gifts: Pampered Chef, Southern Living at Home, etc offer these “incentives” for hosting a party in your home
side income over $600/year: freelance work, a small business, blogging, etc.
sales tax: Shop in a tax free state, but live in a state that has sales tax? You have to pay tax on the items you purchased.
bartering: Use the amount the service would normally cost.

Remember just because you don’t get a 1099, doesn’t mean you don’t owe tax!

While it is a bit of a bummer, it’s still a GREAT deal. 75% off an Apple laptop? Yes, please. Fortunately since we have so many little tax deductions we will likely still not owe tax.

For more info, check out taxgirl’s site. She was a big help to me, so be sure to follow her on twitter @taxgirl.

Kelly

Disclaimer: I am not a tax professional, and my advice should be taken with a giant grain of salt. Please seek professional advice from your accountant.

About Kelly

Kelly Whalen is the founder of The Centsible Life, a blog where motherhood and money meet. Her goal is to help readers live well on less. Kelly is a mom to 4, and loves that she can stay at home with her kids, and still pursue her passions for writing, personal finance, and social media. You can often find her on twitter and Facebook talking money and motherhood.

http://intensedebate.com/people/CentsibleLife CentsibleLife

This is one reason I miss living in Delaware, MM!

That sounds like such a clever way to get around the tax, and so thoughtful of the shop owner to do that.
http://intensedebate.com/people/CentsibleLife CentsibleLife

This is one reason I miss living in Delaware, MM!

That sounds like such a clever way to get around the tax, and so thoughtful of the shop owner to do that.
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http://www.observingcasually.com/ Kosmo @ The Casual Observer

Yep, you’re mostly dead on with the tax advice. I’m married to CPA and I also have a degree in accounting (but I’m not a CPA).

Technically, the side income is still taxable if it’s under $600 – it’s just that the payor isn’t obligated to file a 1099 if it’s less than $600. Which means that the government doesn’t know about it if it’s under $600.

I’d definitely be willing to pay the taxes on a MacBook if I got one free
.-= ´s last blog ..A Health Care Plan I Can Believe In =-.
http://www.observingcasually.com/ Kosmo @ The Casual Observer

Yep, you’re mostly dead on with the tax advice. I’m married to CPA and I also have a degree in accounting (but I’m not a CPA).

Technically, the side income is still taxable if it’s under $600 – it’s just that the payor isn’t obligated to file a 1099 if it’s less than $600. Which means that the government doesn’t know about it if it’s under $600.

I’d definitely be willing to pay the taxes on a MacBook if I got one free
.-= ´s last blog ..A Health Care Plan I Can Believe In =-.