What tax are you responsible for when winning a prize, like a new car? Tag and License, or Prize?

Question

Wife says "We couldn't afford to win a new F-150 Truck b/c of the tax we'd be responsible for!.....

Answer 1

The amount of the prize you win is considered taxable income, just like your salary. It does not matter if you won something or you earned it; it boils down to dollars and cents; to the feds, that is. The cost of the tags/registration could be included with the prize but, no doubt the company you won the car from will include that amount when they report to the IRS. In California, you will also pay a state tax as well as federal. But, for the company who gave the prize, it is categorized as a loss, so they get their money back anyway!
I remember (years ago) someone who won on The Price is Right had to sell some of the items they won so they could pay the taxes due on the winnings.

Answer 2

You would have to put a lien on the truck to pay for the taxes. The value would be the equivalent of gift income for tax purposes, plus the sales tax on the value as well as excise tax for registering/titling purposes. You would get an excellent deal on a new truck that way if you could afford the payments and insurance required.