If you haven’t already heard, Bona Fide Books is holding a poetry contest. Susan Gunelius wrote about the Melissa Lanitis Gregory Poetry Prize yesterday, and I am sure that aside from the prestige the opportunity offers, the $500 prize is also a good enough enticement.
While we’re on the topic of contests and prizes…
Have you ever won a prize – cash or otherwise – from a contest? Let’s say you joined the contest above and you won, what would you do with the prize?
Oh, I can count the things that I can use the $500 for. It may not be a king’s ransom, but it is not such a small sum either. Given that this is the section about taxes, though, my question was more about what you do with contest prizes tax-wise. Are contest winnings taxable?
I wish they weren’t. After all, having to “give away” part of what you’ve won takes a little of the excitement away, doesn’t it? There’s no going around it, though. If you win cash from a contest, then it is considered taxable income. You have to declare this under “Other Income.”
If you win some other prize – a trip, a stay at a hotel, a gadget, etc. – you still have to declare this under the same category. Do you have to declare the exact amount of the prize? The Fair Market Value (FMV) is what’s required, but if you can show that the value of the prize is lower than the FMV, then you can declare the lower value in your Form 1099.
So who’s joining that contest? Good luck, and don’t forget to declare your winnings!