Do We Have to Pay a Gift Tax for the Automobile We Won?

When you win a car, you also get tax liability.

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If you’ve watched daytime game shows, you’re likely all too familiar with how often cars are given away as prizes. On shows like "The Price Is Right," the announcement that the prize is, “A new car!” usually prompts contestants to jump up and down. However, when they get that tax bill a few months down the road, they may not be quite as excited. Whether it’s on a game show or through a local TV station contest, if you win a prize, including money, you’ll owe taxes on your winnings.


You will pay taxes on any automobile you win as income. Additionally, the vehicle will also come with an automobile-related sales tax.

If You Win a Car, How Much Are the Taxes?

Your tax obligation starts when you pick the vehicle up. If you’re in a state that taxes cars, you’ll owe as much as 9 percent in sales tax. There will also be a title transfer fee, but this will be nominal when compared to the other costs. The biggest expense will be at tax time, when your winnings will be taxed as ordinary income. If you win cash, this is a little easier, but claiming the value of your car isn’t too complicated. You’ll get a handy Form 1099 from the entity that issued the prize and, on that form, they’ll have declared a value for your prize winnings. If the car is worth more than $5,000 – as it no doubt is – they may even require you to hand over 25 percent for federal taxes before they’ll release the vehicle to you.

State Exceptions

Since prize winnings are taxed as income, it benefits you if you live in a state where there is no state income tax. Nine states – Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming – don’t impose a state income tax, so you’ll be better off because you won’t have that additional local tax tacked on to what you pay federally.

2018 Taxes and Income Brackets

Since your new car will count as income, you need to pay attention to the income tax brackets that went into effect under the new tax laws. A car valued at $25,000 could be enough to push you into a higher bracket, upping your tax burden. If your household income without the win would have been $70,000, even a car valued at $8,000 will be enough to push you from the 12 percent to the 22 percent tax range.

2017 Taxes on Gifts

In addition to familiarizing yourself with the tax brackets, you should also be aware of the restrictions on gifting a car to a family member. If you gave your car to a family member in 2017, its value has to be below $14,000 to avoid tax penalties. This amount goes up to $15,000 for 2018.