How Do I Pay Taxes On A Vehicle Prize I've Won In California?

Question

I entered a raffle last year in California, where I live, and won a new $30,000 custom motorcycle two weeks ago. We do not have a cash option, but probably will sell the bike shortly after picking it up.

How do we pay the taxes on this vehicle? I've read that the dealer sends us a 1099 form for our federal tax returns, but what about state income taxes? Is there a similar state form used to declare this vehicle as "income?"

On a $30,000 vehicle, how much cash will we have to present to the dealer for other expenses like registration, doc fees, title, etc... in California? Are there any legal loopholes we can use to minimize our tax liability on this prize?

The proceeds of this raffle did go to a bonafide 501(c), non-profit organization.

Answer 1

The Form 1099 value is what you'll pay the tax on, both to the Feds and CA. You'll show that amount on the "Other Income" line on your tax returns.

It would probably be a good idea to make an estimated tax payment as soon as you sell it so you don't pull up short on tax day. Use Form 1040-ES for the Federal tax. CA has a similar form, I don't recall the number but you can get a copy on the FTB website. The amount of the payment would be based upon your marginal tax rate but 25% of the Form 1099 amount should be safe for most folks plus another 8% to CA.

You won't pay the dealer anything for registration fees or sales tax but you will pay those if you register the vehicle. You probably will have to register it in order to title it in your name in order to sell it so there may not be any way out of that. The sales tax will be whatever it is in your home city or county, up to around 8.25%.

About the only thing you can use to minimize the tax burden is the cost of the raffle ticket. Congrats on the win. I think...

Answer 2

The same 1099 will be for both state and federal taxes. You should file a quarterly estimated return for both state and federal, or you'll owe a large amount when you file your return and might also owe penalties.

The fact that the raffle was for the benefit of a 501(c)3 charity doesn't change your tax obligation.

Call the dealer and ask how much cash you'll need for the expenses when you pick up the vehicle. You might also check with the dealer to see if he'll cash out the motorcycle for you - he might. It might be a lot easier than trying to sell it outright, and you'd save the registration fees and sales tax. He won't give you list price on it, but someone you'd find to buy it probably won't either.

Answer 3

Although I am not familiar with California income tax forms, most states use the federal Form 1099 as evidence of income received on such prizes.

You would need to examine vehicle title licensing fees in CA. I live in Wisconsin, and here such fees are not high at all. You MAY be required to pay CA state sales tax on this prize, based upon its value, even though you are receiving it free.

Time to check with the dealership for these assorted fees. Congrats on the prize winning ! Rest assured that, even though you will sell the bike and pay the taxes, you will still come out far ahead of where you were before you won that great bike.

Answer 4

I am in CA too.

Yes, this is income. You also have to pay your counties sales tax. You pay for the registration, but that is tax deductable.

Having never purchased a motorcycle I really don't know what the doc fees are. Sinceyou are reselling right away I think you can get a temporary registration that is good for 3 months. If you decide to keep it your registration is recorded at the date you requestedd the temporary.

I would be really excited about such a win! Sell it and get a prize you really want!

Answer 5

I easily have some magic beans. Wanna purchase some? don't be gullible. Why could yahoo supply you a prize? Did you enter a yahoo contest? grow to be $500 indexed as a prize? no longer fairly. that's a scam. what sort of contest says you gained then asks for a club fee? Why could non-individuals be eligible to win? you will receive extra scam mail in case you respond (or perhaps click) to the e mail because of the fact now they know your e mail is an energetic one and you're a SUCKER. do no longer open mail from every physique you do no longer know. do no longer open e mail from banks/credit unions you do not have an account with. good success.