If an international country wants to attract American tourists to visit and gives away free round trip airline tickets via a raffle, how are these prizes taxed in the U.S.?
Thank you, Ken
All raffle winnings are taxed as ordinary income. You may have gotten a 1099 or W-2G for the value, but even if you didn’t, the value still needs to be documented as miscellaneous income on Line 8b of Schedule 1 2022 Schedule 1 (Form 1040) (irs.gov)
Here’s the paragraph from the 1040 instructions 2022 Instruction 1040 (irs.gov) on raffle winnings (my bolding):
Line 8b
Gambling. Enter on line 8b any gambling winnings. Gambling winnings include lotteries, raffles, a lump-sum payment from the sale of a right to receive future lottery payments, etc. For details on gambling losses, see the instructions for Schedule A, line 16.
Attach Form(s) W-2G to Form 1040 or 1040-SR if any federal income tax was withheld.
AJ
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AJ:
Hypothetically if I visited an international country and won their lottery there, I would have to report it as US income?
Thank you, Ken
Yes. US citizens are taxed on worldwide income.
Edited to add:
Oops! Just noticed that you asked specifically if the winnings would be considered US income. No, they would be considered foreign source income, not US income. But they would need to be reported on your tax return as raffle winnings, just like US raffle winnings.
If there were any foreign taxes that had to be paid in order to collect the raffle winnings, and you got documentation, you may be able to claim a foreign tax credit. You should also confirm whether or not the foreign country requires a tax return for the winnings.
AJ
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