One of the FAQs I get is: Do I have to pay taxes on my winnings?

CANADA

In Canada, you are not taxed on winnings of any kind. Lotteries, sweepstakes, casino jackpots, nothing … However, in Canada, there isn’t the level of prizing or the sheer number of giveaways available to Americans.

I have always said I would happily pay Uncle Sam what is owed so I could win at the level of my American counterparts.

UNITED STATES

In the United States, you are obligated to pay taxes on all your winnings of any kind. Lotteries, sweepstakes, casino jackpots, everything …

If you win a prize valued over $2,000, you will receive a Form 1099-MISC the following year. Otherwise, you are to self-report.

Now, I am not a tax expert, and each person’s financial situation is different. Therefore, you must talk to your tax advisor, accountant, etc., regarding how much tax you have to pay, as winnings are considered income.

PRO TIP: TRACK EVERYTHING

Taxes are a big reason I recommend using a WINNING SPREADSHEET. It lets you track what you won and how you won it, which may allow tax write-offs on your winnings. Ask your tax professional how best to lower the taxes you owe on prizes.

RESOURCES

An H&R Blog article was the only one I could find that discussed the topic. TAXES ON PRIZE WINNINGS & MORE! and it’s not very in-depth. I believe it’s because everyone’s situation is different.

I also found a WINNING TAX CALCULATOR. I have no idea how accurate it is, but it may be good enough to get a rough guesstimate.

While searching, I did find an interesting article from a marketer’s perspective by Realtime Media regarding GROSSING UP THE PRIZE. It helps sponsors understand how they can prepare their winners for the tax burden, or even alleviate it.

A LITTLE HISTORY

Before 2026, the prize limit was only $600. That seemed very low to me. So I Googled. No wonder!

In 1918, the Internal Revenue Service created Form 1099 for use with the 1917 tax year. Also, $600 in 1918 is equivalent to $12,622.69 in 2025. It would make sense to raise the exemption to $10,000. (It was raised  to $2000 in 2026, and it’s a good start, but not close to the original value.)

What’s even funnier is that prize winnings are lumped in with crop insurance proceeds and cash payments for fish (and 6 other categories). What?! LOL!

I’ve had sweepers tell me they don’t enter because they’re afraid of the tax implications. My response? A quote by Evelyn Ryan: “That’s a problem for another day.” Win it first, then figure out how to pay the tax. Because when the wins start rolling in, the last thing you want is to be scrambling at tax time, and that’s exactly why you track everything from day one.