Sorry to anyone invested for interrupting my series on breaking into working in television.
In case you haven’t heard, I got linked from Yahoo! Shine yesterday, and now I’m getting thousands of hits. (*Bows to applause*) Yes, thank you, thank you.
I’ve been getting a fair amount of comments/emails and such. So, let me take a post to talk about the taxes – since that seems to be the big issue.
The night I won, I started googling information on what the taxes would be like on my prizes. I saw so many comments by people with this angry attitude toward game shows winners. “How dare you complain about taxes when it’s all just a bonus to you?!”
Some people did it in a nice way. “A brand new car, and I only have to pay the taxes?! Sign me up!”
I didn’t get involved in any of those discussions, because really. Why? But now that everyone is talking about it with me, let’s go for it.
I don’t want to sound ungrateful in the least. I adore game shows, and anything I win truly is a lovely bonus. (I do agree with that part of the sentiment from the above comments I mentioned.)
However, I also think it’s a little silly how people marginalize the taxes for game shows winners.
As I said, there’s this “‘wah wah, poor me’ – Hey, buck up, you won on a game show!” attitude all around the internet if any past winner even dare utter the word “taxes.”
But, taxes are very real. Taxes definitely prohibit many people from keeping prizes they win (or going on trips they win).
Let’s break it down a little.
To be clear, you are taxed on the value of whatever you win. Of my $21,008 in winnings, only $96 of that was actual money. So, I will be taxed on an extra $21,0008 of “income,” but obviously I can’t just take the thousands of dollars of taxes out of physical, non-cash-money-prizes – unless I sell the stuff I won (which I did).
To understand all the taxes involved:
First, we start with sales tax. I paid $2,067 just to pick up the car.
Then, let’s estimate federal.
I don’t know what bracket everyone’s going to be in. For argument’s sake, let’s go with the median income in Los Angeles. Page 3 of this document states the median income for a single person in Los Angeles – $43,200.
That would mean your game show earnings would be taxed at the 25% rate. So, with this example, we’re up to paying $5,250 in federal taxes.
Then, you have California state tax. There, you’d be in the 8% bracket and pay $1680 to the state.
Add those estimations together:
Sales – $2,067
Fed – $5250
State – $1680
(Again, those are just assumptions. This would easily be more for someone in a higher income bracket – or for someone who wins a more expensive car and goes on to win a big showcase, therefore getting pushed into a higher tax bracket.)
(And, I will concede it could be less if someone has enough deductions, credits, etc. And I’ve heard the sales tax part of it could, in some circumstances, count as some sort of deduction or something. (I’m not a tax professional, nor have I done taxes for my Price is Right year yet, since we are still in it.))
Anyway, in a pretty safe-ish hypothetical range, you’re paying about $9,000 for your car. But that’s starting to get toward the price for which you could actually buy a car in the first place.
So this idea that “only having to pay the taxes still leaves you with a practically free car”… I don’t know how other people feel, but to me $9,000 is not practically free.
Again, I’m very thankful. And even after selling the car for a depreciated price (since it had previously been owned by me – even if only for double digit miles), I still made thousands of dollars (even after the tax bill).
I will say that in our scenario, though, the government could easily come out the same or ahead of the winner on the actual net winnings after selling prizes for depreciated values and such.
I’m very happy and extremely thankful for my day on The Price is Right, but I’ll never stop thinking it’s funny that people trivialize a tax bill of $9,000ish as though it’s totally nothing (and that everyone could still easily keep this new car) – just because it’s a bill from something fun as opposed to traditional income.
(If you have nine grand to drop on a car, go out and buy yourself a car!)