One of my goals in life is to be a contestant on Jeopardy.
I don’t have any illusions about being the next Ken Jennings, but I do have a very good memory for trivia — to the point where my husband refuses to play Trivial Pursuit with me anymore. Pair my status as a walking encyclopedia of useless information with my general lack of stage fright (teaching high school cured me of that), and I think I could potentially clean up on Jeopardy. Well, as long as there weren’t too many sports questions.
Even though visions of Alex Trebek and Daily Doubles dance in my head, I do know that winning Jeopardy will never be my path to riches. Because even if I were able to pull of the kind of streak that Ken Jennings did, I wouldn’t be able to take home all the money I earned.
Here’s the truth about winning big on a game show — the side of winning they don’t tell the viewers watching at home:
1. You owe taxes on your winnings
Not only does the federal government want a piece of your game show prize check, but so does your state of residence and the state where the game show was filmed. While you can receive a credit on your taxes in your state of residence (based on the taxes you paid in the filming state), you’ll still likely see a hefty bite taken out of your giant check.
For example, Jeopardy is filmed in California, where the non-resident income tax is 10%. I live in Indiana, where I pay 3.4% tax on income. If I were to win big on Jeopardy, I would have to pay the 10% state tax to California, but only get a credit for 3.4% in my home state. Ouch.
In addition to having to pay income tax at the federal and state level on your winnings, you also might be pushed into a higher tax bracket, meaning you’ll owe more money in April than you’re used to.
Savvy game show winners elect to have taxes deducted from their winnings, although that doesn’t necessarily take care of every potential problem. For instance, your tax return is going to be more complicated after a win, so you might need to pay for help filing it correctly.
2. Non-cash prizes are taxed, too
If you’re tax-savvy, winning money is fairly straightforward. You can elect to deduct what you owe from your winnings, and go along your merry way. But what if you win a new car, a trip to Machu Picchu, or a lifetime supply of chocolate pudding? The IRS considers those to be earnings, too, and you have to pay taxes on the official retail value.
There are a couple of problems with this. First, if you don’t also win cash from the game show, you might not have the money to pay taxes on your winnings. So you’re faced with the option of either walking away from your prize, or scrambling to pay the tax bill on your new car.
The second issue has to do with the official retail value. The value according to the game show is often inflated compared to what you’d pay for the item if you went shopping for it. And a higher official retail value means a higher tax bill.
3. You can’t opt for cash-value instead of prizes
You might think an easy solution would be to request the cash value of prizes instead — but game shows won’t let you do that. You’re entitled to the exact prize you won, or nothing.
But of course, the rules aren’t the same in reverse. If the item you won isn’t available for any reason, the game show will give you cash instead.
The Bottom Line
Just like casinos, game shows are stacked in favor of the house.
If you dream of showing off your trivia knowledge, your ability to guess the prices of retail items, or your hangman-playing skills, plan on doing it for the experience rather than what you could win. You might find your winnings are more of a headache than they are worth.
Did this information surprise you? What game show do you dream of being on?