Car Raffle Tax Information
The winner of the Parish Festival car raffle wins their choice of a new vehicle, or $10,000 cash. The IRS requires 24% of the value of the raffle prize be sent to them as ‘withholding’ at the time of winning the prize, just like income taxes are taken out of your paycheck by your employer as ‘withholding’ and sent to the IRS. This is done via IRS form W-2G.
PLEASE NOTE THE FOLLOWING:
If you choose the cash prize of $10,000, St. Jude Church will pay the ‘withholding’ amount or “gambling tax” for you, such that you end up with the full $10,000.
If you choose the vehicle, you will be responsible for and required to pay the ‘withholding’ amount.
The winner of the car must pay the gambling tax withholding amount of 24% of the value of the vehicle to St. Jude Church at the time of title transfer of the car. St. Jude Church will complete IRS form W-2G and send the 24% withholding amount to the IRS on your behalf. St. Jude Church will also provide you the needed paperwork for your tax return. The winner does not pay sales tax on the vehicle. More information about IRS Form W-2G can be found on the IRS website.
Example: Car value $20,000. Withholding amount of income tax = 24% of $20,000. $20,000 X 0.24 = $4,800.
Therefore, in the above example, the winner would pay $4,800 to St. Jude Church in order to finalize the paperwork and take title to the car. There is no sales tax associated with this gambling(raffle) winning, just the W-2G income tax withholding or “gambling tax”.
If you have any questions about this, please contact Kelly Flowers at 440-366-5711.