Do you pay taxes on sweepstakes winnings?

Last reviewed September 2026 · researched from primary sources. Not legal or tax advice — see our Disclaimer.

Yes. The IRS treats the value of any prize you win — cash or not, large or small — as ordinary income, taxed at the same marginal rate as your wages. The sponsor reports prizes at or above $600, and you are responsible for reporting the rest.

Prizes are ordinary income

Under the Internal Revenue Code, “prizes and awards” are taxable income. IRS Publication 525 (Taxable and Nontaxable Income) states that if you win a prize in a lucky-number drawing, quiz show, beauty contest or similar event, you must include it in your income at its fair market value. There is no special lower rate for prize money — it stacks on top of your other income and is taxed in your bracket.

The $600 figure is a reporting threshold, not a tax-free line

A common misreading is that a prize under $600 is tax-free. It is not. $600 is simply the point at which the sponsor must send you and the IRS a Form 1099-MISC reporting the prize in Box 3 (“Other income”). Below $600 you get no form, but the winnings are still taxable and you are still required to report them.

How a prize is reported

• The sponsor sends Form 1099-MISC by January 31 of the year after you win, showing the prize value in Box 3.
• You carry that amount to Schedule 1 of Form 1040, line 8i (“Prizes and awards”), which flows into your total income.
• For a non-cash prize, the amount reported is the fair market value — usually the approximate retail value (ARV) stated in the official rules, though you can challenge an inflated ARV with evidence of the true market price.

Withholding on larger prizes

For prizes above $5,000, federal backup or wagering withholding of 24% can apply. With a cash prize the sponsor withholds it before paying you. With a non-cash prize there is nothing to withhold from, so the sponsor may require you to pay the 24% to them before releasing the prize, or issue a Form 1099 and leave the full tax to you. Withholding is a prepayment, not the final bill — your actual tax depends on your bracket and could be higher or lower.

State taxes

Most states tax prize income too, at rates from around 3% to over 10%. A few — including Florida, Texas, Nevada, Washington, Tennessee, South Dakota and Wyoming — have no state income tax, so residents there owe only federal tax. If a prize involves travel to another state (a “win a trip” prize, or a car delivered elsewhere) a second state may also want its share.

Sweepstakes casino redemptions

Redeeming Sweeps Coins for cash is taxed on the same principle: the redemption value is income. Operators generally issue a 1099-MISC once your yearly redemptions cross the reporting threshold. We cover the specifics, including how losses and purchases factor in, in the sweeps casino guides.

Set money aside before you spend the prize

Because prize tax is not withheld from a non-cash win, a large prize can create a bill with no cash attached to pay it — the classic problem with winning a car or a house. A safe rule of thumb is to reserve 25–40% of the prize value for combined federal and state tax, and to check whether you now owe estimated quarterly payments to avoid an underpayment penalty.

Tool: estimate the federal and state tax on a specific prize with the sweepstakes tax calculator.

Sources: IRS Publication 525 (Taxable and Nontaxable Income); Form 1099-MISC and its instructions; Schedule 1 (Form 1040). Thresholds and the withholding rate are current for the 2026 tax year and can change. This is general information, not tax advice — confirm your situation with a licensed tax professional.