The Surprising Truth About Winning Big on a Game Show

by Emily Guy Birken · 27 comments

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?

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{ read the comments below or add one }

  • Bob says:

    You Americans should know that, if you win any kind of a prize — cash or otherwise — on a game show, in a casino, or in a lottery anywhere in Canada, it is completely tax free! As well, any kind of inheritance that someone might receive as a beneficiary of a will and/or estate is also tax free in Canada.

  • Grinch says:

    You don’t have to be a big prize winner either. I won 2 tickets to a roller derby match from a radio station and they handed me a 1099. Fred is right, the cash value is based on fair market value. Interestingly, if you have lottery or gambling winnings, you can reduce that income by the amount of losses you had that year. So if you play, save your losing tickets for the day when you land the big one. Or spend a few minutes outside the local 7-11 picking up losing tickets off the ground.

  • Kate says:

    No, it didn’t surprise me. I have been playing the lottery for nearly 20 years and have paid close attention to this. I also used to work for a firm which had a practice in assisting lottery winners, who are generally babes in the woods vis-à-vis sums of cash larger than a couple of thousand dollars.

  • Fred says:

    If you think winning a prize makes you pay high income taxes, just try earning a high wage at work. Last year I paid $300,000 in income taxes on $700,000 of wages. And that doesn’t include social security or medicare taxes.

    • David Ning says:

      Hey, at least you aren’t in the highest earning bracket in California because you could be paying more than half to the tax man!

    • Todd jones says:

      So you ONLY clear $400,000 a year? My god! How do you clothe yourself? I’ll keep you in my prayers jackass.

      • Bob Strasner says:

        Wow. I guess guess you would be ok with the government taking nearly half of your paycheck? Jealousy will get you nowhere. David earned his income by educating himself or starting a business. You were offered the same opportunity and chose not to do so. You people amaze me. I don’t earn nearly what he earns but I do make a comfortable income because I worked two jobs and paid my way through college. The government takes 30% of my income before I ever see it. When I see people like you cursing those of us who have worked hard to get where we are it kind of pisses me off. You don’t have a right too it, the government doesn’t have a right to a third or in David’s case half of it and I should be able to decide what charity I want to support or who I want to support with it. I do not mind paying my fair share but I don’t think you should get a free ride on my nickel due to my ambition.

    • Tom says:

      You could write off a charitable donation to me!!

    • Tom says:

      Fred, you could write off a charitable donation to me!!

  • caroline says:

    I’d love to win a car of any kind, assuming it was new and under warranty. Then we could sell my husband’s reliable and perfectly-okay-but-ageing VW and have the new one instead, with whatever we could get for the older car in savings. Since we flatly refuse to get into debt over buying cars, that’s the only way it’s going to happen!

    • David Ning says:

      Hang on to that willpower Caroline. Keep up that discipline and you’ll be financially independent sooner rather than later!

  • Property Marbella says:

    Here in Spain, as in most European countries it is 20 per cent tax on all kinds of lottery Jeperdi TV, football, horse gambling winnings, etc. no matter in which country you have won money. You pay tax in the country in which the profits are paid out.

    • David Ning says:

      It would be so much easier if the government will just set a standard tax rate on the winnings. This way they can just take it off the top when they distribute the money to the winner and everything will be settled immediately.

  • DC says:

    The IRS clips all winnings at the rate of 40 % of the retail value.

    • David Ning says:

      Good to know DC. At least you won’t end up PAYING out of pocket for your winnings if you win a product!

      • Fred says:

        Where did you get the 40% number? IRS will tax you on the “fair market value” of your winnings. They don’t use any kind of arbitrary write-down.

    • William Cullen says:

      That’s just wrong. When I won $53,000 in prizes on a show, I did my homework. Winnings are taxed as earned income, and taxed at the FAIR MARKET VALUE of the prizes. So, I went shopping. The 2WD Chevy Blazer 4-door I won, was the worst possible combination (tuners did not want a 4-door, and in the snow belt, drivers did not want a 2WD), so the local Chevy dealer valued the car at $6000 LESS than the retail value, and signed a document saying that. I went to stores all over town, and every single one of them was willing to sign a document testifying that the price they quoted me was the price at which the item sells. My $53,000 liability dropped to just over $35,000. Sure, it was a bit of work, but I came out way ahead of the game. Anyone who whines about problems with winning on a television show, and says it isn’t worth it, is a moron.

  • Mark Ross @ Money Saving Dude says:

    Wow. I didn’t know all about that. It’s hard to win a game show, and now it’s also hard to get and manage your winnings. I was even hoping that I could join Jeopardy or Wheel of Fortune. Just kidding. 🙂

  • constance says:

    I’m one of those unlucky souls who are constantly described as shy and I would probably freeze on stage regardless of whether I knew the answers or not

    • David Ning says:

      Ha count me as the second person to freeze on stage. If you and I were in the same show the episode would probably be pretty boring 🙂

  • David Ning says:

    I always pondered about winning a car in these game shows. If I accept the car, which is unlikely to be a model I’d be totally in love, I would pay tax on full retail value and then have to sell it immediately for probably less than half of the inflated amount. If I end up taking the car, I would have to drive a car I don’t like (whether it’s the options, the model or even the color).

    So I can choose to not be THAT far ahead financially in the former in exchange for a ton of my time selling the car. Or I can choose to be grumpy driving a car I don’t like in the latter – and all the while everybody is telling me how lucky I am to win a car!

  • P Weiss says:

    How is “cash value” determined? wholesale, MSRP? Is this negotiable?

    • David Ning says:

      It’s probably always going to be the highest amount they can think of, most likely the MSRP. They do it not to fleece you, but to make it seem like their total prizes sum up to the biggest number possible for marketing reasons.

    • Fred says:

      It’s “fair market value”. The price you would pay if you purchased the item brand new.

  • Marie @ My Personal Finance Journey says:

    I know about this rule of the game show: You can’t opt for cash-value instead of prizes. 10 years ago, we lived in a big city and I had a chance to joined on a game show, before the game started, all the rules and regulations of the show were explained clearly to us.

    • David Ning says:

      It’s ethical of them to at least explain everything to you ahead of time. I heard Oprah’s last season on broadcast TV were giving things out like crazy and they even covered the tax part, which was awesome.

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