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The Taxability of Prizes, What everyone should know When you win a prize, there are two winners: you and the taxing authorities. Should you be fortunate enough to win that trip of a lifetime to the French Riviera in your new yacht, here is what you need to know. Prizes and taxes Prizes are taxable. Almost all prizes are taxable income. You report them on your income tax return as other income. Whether your prize is cash, merchandise, or free services, this is the case. The prize may be reported to the IRS. Prizes valued at $600 or more must be reported to the IRS. Prize values below this reporting threshold may also be reported at the discretion of the prize's sponsor. As the winner, you should look to receive the proper Form 1099-MISC. Employee awards are different. Different rules apply when you receive a prize or something of value from your employer. These fall under business expenses, fringe benefits, and award rules. Things like a holiday turkey or occasional service awards are often but only sometimes non-taxable awards. On the other hand, a bonus or prize points for merchandise as a sales award usually needs to be reported as income. Gifts and prizes have different tax rules. A different part of the tax code applies to gifts. In short, gifts received from someone less than the annual gift threshold ($17,000 in 2023 or $34,000 for a married couple) are not deemed prizes.