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Taxation Tips and Tricks for Sweepstake Prize Winners

So you won the raffle, and the next thing on your mind is how best to spend your money. Unfortunately, even before you get to touch your prize, the rule of law will have you forfeiting a portion of the money.

This rule goes for all kinds of raffles, be it a standard raffle, online raffle, or otherwise; the government is going to tax your winnings.  

We’re here to tell you, there are a few ways to get around some of these rules. Below, we’ve listed some of the most approachable methods for bringing home as much of the prize money as you can. 

Choose Cash  

Some raffles will give you the option to choose between a prize in-kind or in cash. If your raffle follows this model, it might be better for you to choose the cash option.  

This is for two reasons. Choosing the cash prize will mainly be easier to manage after winning it, meaning that paying any taxes will be much more convenient.  

The second reason is that obtaining the cash equivalent of the prize in-kind will be much harder as this will depend on the demand for the prize. For example, if you won a car you’d have a hard time selling that, especially if you don’t have experience in that kind of business.  

Put the Prize Up For Sale

Alternatively, some people might have the time, patience, and skill to sell any items they won through a raffle. 

While it may seem counterintuitive, selling the prize of a sweepstake is one of the surest ways to still make a profit even after taxes. Keep in mind that whether the prize is a material thing or cash the government will find a way to tax it.  

For this to work, the prize should be something easily sellable. If not, at least make sure it's something that you have some knowledge in, if anything to ensure that you don’t get anything less than your money’s worth for it.

Selling the prize will help you to both pay your taxes and still bring home something to enjoy.  

Consider Donating 

For some people, winning some online raffle draw isn’t something that was on their list of things to do. If you can count yourself as one of these people, you should consider donating the prize if only to avoid having to pay taxes for something you don’t even want for yourself.  

Keep in mind though that for this to work the organization you’ll be donating to qualifies under Section 501(C)(3) of the Internal Revenue Code (IRC).

Given that the organization qualifies, you should be exempt from having to pay any gift tax or income tax. 


Despite there being a slew of different ways to avoid paying taxes on your winnings, we highly recommend that you just keep the prize and enjoy your winnings. While the taxes may seem high, it’s nothing compared to the joy that you will experience from taking home the prize itself.

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