I won 1000 dollar gift card to Home Depot from blingo, question about getting taxed?

Question

Blingo had me send them a tax form since it was over 600 dollars. I guess anything over 600 we need to get taxed on prizes.
so exactly, how much should i set aside? does it go into the same category as gambling winnings?


I make 45,000 a year before taxes. Im in CA and fed 1 and state 0. i was thinking of setting aside like 300 dollars. i thought it would be 28 percent of winnings or something. i hope not : (

also blingo is a legit site as I already got the prize through fed ex and its been on the news as a very reputable site.

Answer 1

It's taxed as ordinary income. They had you fill out the W-9 to get your SSN for the Form 1099 that is coming. The $600 rule is for them to complete the 1099. The entire prize is taxable. List it on your tax return on the Other Income line and write "prize" in the space by the line.

Your income probably puts you in the 25% tax bracket unless you itemize your deductions and have something over $11,000 in deductions. That means that the tax bite on the prize will be $250. Claiming 1 withholding allowance probably leaves you enough "wiggle room" that you still won't owe at filing time; it will just reduce your expected refund by $250.

Answer 2

This kinda sux, and please don't take this as disrespect, 'but at $45k/yr in CA, you probably ain't got much habitat to be utilizing any Home Depot products. (Next time, get the card for Best Buy, heh heh...)
So it looks like your going to have to pay a penalty for being "lucky" . . which means you'll have to come up with cash you don't have. This means you have to concentrate on converting your gift card to cash.
Anyway, you could try spending about $300 of it on goods, then see if you can get a cash refund. Or watch for a customer who's buying a high ticket item, tell them you'll sell them the same thing (sweeten it by offering it at 5% off and swallow the loss), then you'll use your gift card to buy then turn it around to them for cash. Probably won't work, but if it does put the cash in the bank and use it on taxes. Cause you're right about the $600. . . they have to report it to the Feds and you'll get a 1099 to show it as unearned income. So you're gonna have to pay Fed tax on it, maybe state, too. Call CA Dept of Rev to be sure.

So I'd say expect to pay about 25-35% income tax
(it's easier when you win at the casino, 'cuz then the prize is cash to begin with, and the casino withholds it for you, giving you only the $600 bottom line, with a 1099 love note showing the $300 withheld. that's why the IRS has permanent offices at casinos.)

Good luck.

Answer 3

The amount you are setting aside should be plenty.