Can You Afford Free? Taxes Spoil the Game Show Win

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You've seen the game shows where contestants hop around the stage excited beyond belief at the possibility of winning cash and prizes. Most notably, among shows that give away merchandise is The Price Is Right (TPIR). Contestants who win the big prize, known as the Showcase Showdown, can scoop up tens of thousands of dollars in trips, appliances, sports and recreation equipment, cars, etc. What you don't see, according to some of the winners, is when the other shoe drops. That is, the tax shoe – and it drops fast.
Win the prize, pay the tax piper
Most of us know if we win a cash prize, there are taxes to pay. Big prizes mean big taxes. But many game show contestants don't realize when they win merchandise, there's also tax to pay, and you might not get out the door with your prize until some of that tax is paid. 
When the prize is merchandise or travel – a washer/dryer, a new car, a cruise – it's a different ball game. Just ask Andrea Schwartz, who is warning unsuspecting game show contestants. 
Last year, Schwartz was thrilled to win $33,000 in prizes on TPIR. The list of goodies included a pool table, a shuffleboard table, and a red Mazda2. After the show, she was whisked backstage for a dose of reality – the tax issues. 
TPIR is filmed in California. Schwartz found out the hard way that when you win prizes in the Golden State, you don't get to wait until you file your tax return to pay the taxes. If you want the prize, you pay right then and there, said Schwartz.
In an interview with Yahoo! Shine, she told reporters, "Yeah, you don't just drive off the back lot with the car. After the show, you fill out some paperwork and basically sign your life away. You say that you're going to pay the taxes on it. If you win in California, you have to actually pay the California state income tax ahead of time." 
When it does come time to file your tax return for the year, there will be additional forms to fill out, and the value of the prizes will be added to your income. And that could push you into a higher marginal tax bracket for part of those winnings. 
For Schwartz, before leaving TPIR, getting her prizes released to her meant she had to pay $2,500 in taxes. Fortunately, she had also won cash of $1,200 playing TPIR's Plinko game and was able to use that money to pay the taxes. That's not exactly how she envisioned spending her winnings, but it did help.
The AICPA told an ABC News reporter that contestants generally have to file a tax return in the state where the prizes were won – as Schwartz said – and then file again in their home state if their state charges personal income tax. They do get to claim a tax credit in their home state for the taxes paid elsewhere.
There's more . . . 
On TPIR (and possibly other shows that give away merchandise), the value of the merchandise you pay tax on – for example, on the Mazda2 won by Schwartz – isn't the same as what it might be at a car dealership, especially after negotiating. TPIR winners pay tax on the manufacturer's suggested retail price (MSRP), which is generally a great deal higher than one would pay on the free market.  
TPIR will only ship your prizes to your home. If you want to have an item shipped to an alternate address, you must pay that cost. Schwartz won a pool table, but she lives in an apartment where there wasn't room for such a large prize. Eventually, to pay the taxes on her winnings, she sold the pool table and the shuffleboard table. Their combined value was listed as $14,000. That's the amount she paid tax on. But she was only able to sell the items on Craigslist for $4,500. What the heck – at least it paid the bill!
Another TPIR winner told Consumerist, "I won $57,069 worth of items. I had to pay around $17,000 or $20,000 in taxes, but I'm not 100 percent on that, I tried not to pay attention."
He and Schwartz both affirm that many contestants end up declining their prizes because of taxes or for other reasons. 
Can you ask for the cash value instead of the prize? 
Not generally, unless there's a problem with the prize. For example, the man who won merchandise worth $57,069 was told one of his prizes wouldn't be available for shipping for quite some time, so he was offered cash and took it. 
The bottom line is, glitz isn't always what it appears. Contestants are often disappointed at the net value after the tax man is paid. Such is our tax system, but overall, they still win . . . something. 
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Nothing is ever FREE

Unless you live in a country that doesn't tax you on prizes you win.

And pretty much every one of those countries that you think are so great have MUCH higher income taxes. So..forgive me for being intelligent, but since the vast majority of people will never win anything on a game show, I would rather pay 25% or so on my income instead of 35% in another country...and on the very unlikely chance that I go on a game show and win, pay the tax on that too. I will still come out ahead over my life.

They should make these shows in Florida where there is no state income tax.

Or Texas. Or The show should just include an additional cash prize to pay the taxes for them.

Then the contestant would have to pay tax on the tax that the show paid.

So they add enough of a cash prize to cover the tax on the prizes, plus the tax on the money. So..say they won $25,000 worth of prizes. And less say they just pick 25% as the average tax bracket for contestants. They would offer 33% more than the value of the prizes because that would be enough to cover the taxes on the prizes, plus the extra cash given.

Yea, but if you are not from Florida, you have to pay the tax in the state you live in.


Not even worth being on the stinking show, then?!

Ok, so she payed $2,500 for a car, plus all the other stuff. Such a horrible deal!! I get that it may be a surprise for some people, but come on. Plus yeah the pool table and shuffleboard were worth 14,000, well she made money still selling it and after the taxes.

Not like they could say they wanted a lower value prize for the game they played. Maybe there should be a way to state what you want your maximum tax requirement to be before they surprise you with a brand new $157,000 R8. Or the Tax code should be revised so that the show pays yearly taxes on the value of its prizes for the season and the contestants don't. But then the media giants would not make as much money. They get the vehicles and prizes at cost and then claim them to be MSRP value and the "winner" has to pay the MSRP value instead of what the show paid for the actual item.

you know the Tax code ain't getting revised in the payers favor. Not happening.

So true. Its always the government's favor.

If you think they are getting the vehicles completely for free, you are naïve.

paying $2500 for a $10,000 wiener-mobile isnt winning much. resale value is usually half. plus i think she paid more. the taxes are 30%+ or so.

It took all of the money she won to pay the taxes, so she ended up with nothing.

That was just the sales tax. At the end of the year you get taxed again. The value of the car is considered as income and you get taxed on that. Gov't gets to double dip when it is a car. Plus there are registration and title fees. If it is a nice car too, you get an insurance increase as well...

Aint that something that you win a car and you are almost just getting screwed by the government for winning. Not right. They should come up with something that at least allows someone who is poor the chance to get their prize and sell it to pay the taxes and then keep whats leftover.

No...she paid $2500 just to leave the studio She had to pay much more when she filed her income tax. There is no such thing as a 7.5% tax bracket. That was just the California tax.

U r right. Plus you think if you win a car and cant pay taxes on it even if you borrow the money to pay it and plan to sell it to pay back the borrowed money, you are still going to end up with some cash on the end that u didn't have. Like many have said it is like an investment.

Does anyone know about Illinois or Florida??

Then why bother going on these silly shows in the first place. If you won "survivor" of course you don't get $1 million. You net about $600 large. This is fact.

you're right, who the hell wants "600 large"...

These shows KNOW most people cannot afford their prizes, it is just a marketing ploy. An advertisement for the products on the show. Like others say, no need to go on the show because you cannot afford it. Unless you are already rich, then what would be the point? The only thing you can afford are the cash prizes because you can use part of the money to pay the taxes. These game shows are worthless. I do not even waste my time watching them. They give people FALSE hope.

I want to win the Travel Channel 100k trip to Hawaii, but I'm scared of the taxes.

I dont blame u.

This winner was stupid then. You can challenge the value of those prizes if they are inflated. And if you can show that you could buy them for a lower prize, that is all you have to claim on your taxes.

Not stupid, ignorant which means under educated about something. There is a difference.

Who DIDN'T know this already? This is why Wheel of Fortune stopped doing their showcase shopping. IT is also why when they did do that, many contestants would buy the cheapest stuff they could so that they would have the most amount on a gift certificate. Since at least that could be used for something they need instead of a lawn gnome that shows an inflated price.

Same happens to the ones that win the million dollar house from HGTV. Most keep the furniture and sell the house. Such a shame