If I win a car in a raffle then I have to pay taxes on it. What if, however, the raffle prize includes $20,000 along with the car (MSRP ~$105,000)? What's the story then? Will the cash cover the taxes? Are there other taxes/fees I'm not considering?
closed as unclear what you're asking by Joe, Nathan L, Victor, Dheer, JoeTaxpayer♦ Sep 12 '15 at 5:19
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For simplicity, let's say you're taxed 10% on the car and any other winnings. If the car is valued at $100,000, then you need to pay $10,000 out of pocket. If they give you $10,000, then you are taxed on a total of $110,000 and will pay $11,000 in taxes (or $1k out of pocket since they gave you $10k in cash).
To break even and pay nothing out of pocket in taxes, in this example you would want to win a $100,000 car and also $11,111.11 in bonus cash. At 10%, the taxes conveniently come out to $11,111.11.