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Like lottery winnings, game show winnings are taxable in a variety of ways. For starters, it is important to note that cash and non-cash prizes (new cars, paid vacations) are taxable.
When you take into consideration your current annual income, coupled with the amount of your winnings, receiving money from a television game show could push a contestant into a higher tax bracket. This will cause him to pay more taxes overall at the end of the financial year. A person's federal tax bracket can go up to a maximum 39.6 per cent.
State Income Tax
Aside from being placed into a higher tax bracket, game show winnings are also open to state income taxes. Depending on the state, a person could give as much as half of her winnings away to the state government. There are no tax breaks for game show winners in the majority of the 50 states of the U.S.
In addition to state income taxes, many states withhold up to 28 per cent of a contestant's winnings to pay for taxes up front. However, if this is not enough money to cover the amount of taxes you may be charged, additional fines and penalties may be assessed over the course of a year. This means that overall, you'll be paying more annual taxes from being in a higher tax bracket after immediately giving away 28 per cent to the state because of a policy, right before you are immediately taxed anywhere up to 50 per cent of your winnings in general state income tax. Suddenly, winning a lot of money on a television game show has turned into winning a moderately decent amount of money on a television game show.