We know how gameshows usually work: some lucky contestant plays the
game, wins and takes home one or more prizes: a wad of cash, a car
and/or some other extravagant item(s). Winning a car sounds appealing,
especially when you need a car and have trouble getting an auto loan
or financing due to bad credit or no credit. But, when it comes to
winning a car, it’s not as simple as being handed a shiny set of keys
and driving home in your new freebie. There’s plenty of paperwork to
fill out — and taxes to pay — before you can claim your prize. Vonnita
Jones, a member of the IT team here at Credit Acceptance, knows all
Jones was a contestant on The Price Is Right in December of
2015 and won not one, but two cars — a Toyota Scion and Hyundai
Accent — along with five pairs of Tory Burch shoes, $3,000 cash and a
“After I won, I went backstage to meet with the show’s legal team and
sign the contract,” Jones said. She also received a spreadsheet
listing all the prizes she won along with the total dollar amount. An
accountant reviewed the spreadsheet with her to let her know how much
tax money she owed on the prizes.
According to the American Institute of Certified Public
Accountants, contestants generally have to file a tax return in
the state where the prize was won and then file again in their state
of residence (if their state assesses a state income tax). In some
cases, the value of the prize will be added to the contestant’s
income, possibly pushing the contestant into a higher tax bracket.
In Jones’ case, she had to pay taxes in California, where she won the
prizes, and in her home state of Michigan. And, in order to actually
receive her prizes, she had to pay the California taxes in advance.
“You have within 60-90 days to pay for the California taxes in
advance,” Jones said. “But it wasn’t difficult to pay the California
taxes because the accountant told me they would withhold the cash I
won on the show and allocate it towards the state’s taxes I owed.”
Although gameshow winners are required to pay taxes on the prizes
they claim, Jones said that isn’t their only option.
“Once you win something on a gameshow, you have the right to opt out
of a certain prize,” she said. “So say, for example, I won a boat… I
don’t have to take the boat; I can decline that particular prize. You
might hear other (gameshow winners) try to say, ‘I didn’t want this or
that because of taxes,’ but they had the right to say they didn’t want
it — a lot of people don’t know that.”
Since Jones couldn’t receive any of her prizes until after the show
aired in March of 2016, she was well prepared for the 2016-2017 tax
season. “It was a matter of being responsible and putting money
aside,” she said.
Although winning a free car (or two, in Jones’ case) on a gameshow is
pretty cool, there’s still a bit of a process — and money — involved.
And, you will certainly need to consult your tax advisor.
If you’re in the market to buy a car and need help getting credit
approval due to having bad credit or no credit, Credit Acceptance can
help! Fill out this short form to get connected with a
dealer enrolled in the Credit Acceptance program.