Do I Have to Pay Taxes on a Sweepstakes Win

edited by: Eve Fish

Yes. You are required to pay taxes in the United States for any money you win. The Internal Revenue Service (IRS) states that “winnings from lotteries, raffles, sports betting, horse races, and casinos” must be reported as income and you must pay tax on them.  

This also applies to winnings that aren’t cash (such as prizes or trips). You are expected to determine the fair market value of these prizes and claim this as your income. 

This is true even if you did not have to do anything to win the prize. You may also be charged state income taxes in these cases, unless you live in a state that has no state-level income taxes.  

Your tax rate will be determined by your federal income tax. To find out exactly how much you will be taxed, you will need to look at the federal income tax brackets. If you win a large amount, there is a possibility that you could be moved into a higher tax bracket. 

However, you won’t pay that rate on your entire income. The way it works is that you’ll only be charged tax at the new rate for the amount that’s part of the new tax bracket. For instance, based on 2025 United States tax brackets, if you earn $48,000 a year, you will be in the 12% tax bracket. However, this bracket goes up to $48,475. If you won $1000, the amount over $48,475 (which is $525) would be taxed at the next tax bracket, which is 22%. Your entire income wouldn’t be taxed at 22%, just the additional $525. 

What to Do When You Win a Prize 

Even if you win a small prize, the IRS still considers this income. For smaller prizes, you probably won’t be given a form, and you won’t have any taxes deducted at the source. This usually only happens if you win several hundred dollars or more.  

However, since you’ll still need to report the income, take a note of the amount and the date you won it. The IRS probably won’t audit you over $50, but keeping this information handy will help you just in case they ever do.  

How to Report Winnings on your Income Taxes 

If you have won a small amount in a sweepstakes, such as $50, you will not be required to complete a separate form on your income taxes to claim this amount. You can typically report it on Form 1040, which is the standard income tax form 

You will claim this amount as “Other income” and will need to write a description of the income. You can title it “Sweepstakes winnings” or “Prize winnings.” 

You will need to use Form 1099-MISC if you are reporting more than $600 in winnings over the course of the year. If you won more than $600 from one company in the year, they will send you the form, if you win smaller amounts from various companies, you still need to report this income even if you did not get a form.  

Form W-2 Gv is used if you are reporting gambling winnings. This is needed if your winnings hit certain thresholds (usually $600 or more, but the amount varies depending on the game). 

How Gambling is Different 

Gambling wins are slightly different because you are also allowed to claim gambling losses and other expenses, in certain situations. The IRS requires you to keep a record of your gambling, including the dates and wagers, the amount won or lost, the gambling establishment, and if anyone else was with you.  

Your tax situation can change somewhat if you are considered a professional gambler. A professional gambler is someone who intends to use gambling as a way to profit or earn an income, rather than someone who uses it for occasional entertainment. In this case, you can deduct your business costs from your taxable income if you file as a self-employed individual.  

What Happens if You Don’t Report Winnings? 

You are supposed to claim all income on your taxes and winnings (even a sweepstakes win) should be reported on your taxes. If you do not correctly report all your income, you will be undertaxed. Since this does not accurately reflect your situation, the IRS could technically come after you. 

However, the amount matters. For small amounts, like a single $50 win, you will not likely face any legal pressure. You should still report the income, however. It is considered negligence or disregard of the rules to ignore tax regulations. 

 That said, a substantial understatement of your income can result in a penalty. The IRS considers a substantial underpayment to be 10% or more of what you should have reportedvii. If this understatement amount is more than $5000, you can face additional charges and penalties. However, if you can show that you made reasonable attempts to report the correct tax, the IRS may not charge any penalties.  

In Summary:

In general, you are required to report all earnings you receive in the year, and this includes prize money or sweepstakes winning. If you win a large amount, such as a lottery, you will be taxed right away and this amount will be added to your income, so you may have to pay more tax later.  

Smaller amounts may not be taxed right away, and you may not be provided with any forms. You are still responsible for claiming these winnings as income, however. 

It’s important that winnings aren’t considered earned income, so they don’t qualify for credits like the Earned Income Credit, which helps low- to moderate-income workers get a tax break. 

If you are in doubt about whether you should claim a $50 sweepstakes prize as income on your taxes, it’s a good idea to err on the side of caution and claim it. The amount of tax you’ll pay will be quite low and you won’t have to worry about the IRS breathing down your neck later.  

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