Just curious about....
Mar 24th, 2006 | 10:12 AM
#2
Joined: Dec 2003
Posts: 3,501
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Since you've posted this question on the Canada forum, I'll take a wild stab and guess that you're a Canadian tax payer. To the best of my knowledge, lottery winnings are not taxable in Canada. So it seems logical that if you win a free trip it too is not taxable.
Here is Canada Revenue Agency's website that explains lotteries and giveaway contests:
http://www.cra-arc.gc.ca/E/pub/tp/it213r/it213r-e.html
If I've read the site correctly, it seems that a prize that is distributed by an employer as part of a bonus scheme is deemed to be income and, as such, is taxable. If the prize is given as a gift, it also is taxable.
So, in order to enjoy tax-free status, the prize has to be won by chance in a lottery or betting scheme that is available to the general public.
At least that is my interpretation of what that website says.
Here is Canada Revenue Agency's website that explains lotteries and giveaway contests:
http://www.cra-arc.gc.ca/E/pub/tp/it213r/it213r-e.html
If I've read the site correctly, it seems that a prize that is distributed by an employer as part of a bonus scheme is deemed to be income and, as such, is taxable. If the prize is given as a gift, it also is taxable.
So, in order to enjoy tax-free status, the prize has to be won by chance in a lottery or betting scheme that is available to the general public.
At least that is my interpretation of what that website says.
Mar 24th, 2006 | 10:29 AM
#3
Joined: Jan 2003
Posts: 2,889
Likes: 0
On the other hand, if you live in the US, the rules are different.
If you win a lottery, the win, at fair market value, is taxable at the federal level. Each state has their own rules about income tax on winnings.
If the prize comes from an employer or as some other sort of prize in a contest, it is also taxable.
If it comes as a bona-fide gift, it is not taxable, up to a value of $11,000 in any given year. For gifts over that amount, they are usually taxable to the giver but not to the recipient. IRS has a fairly tight definition of the word "gift" and, if you think it may apply to you, you need to get professional tax advice to be certain.
If you win a lottery, the win, at fair market value, is taxable at the federal level. Each state has their own rules about income tax on winnings.
If the prize comes from an employer or as some other sort of prize in a contest, it is also taxable.
If it comes as a bona-fide gift, it is not taxable, up to a value of $11,000 in any given year. For gifts over that amount, they are usually taxable to the giver but not to the recipient. IRS has a fairly tight definition of the word "gift" and, if you think it may apply to you, you need to get professional tax advice to be certain.
Mar 24th, 2006 | 10:38 AM
#4
Original Poster
Joined: Mar 2006
Posts: 2
Likes: 0
Thanks! Yes I am Canadian.
Its a free trip to Mexico and the fine print just says something vague about taxes. My SIL actually won the trip but was confused about what taxes had to be paid. Probably just the airport taxes and stuff like that then.
Its a free trip to Mexico and the fine print just says something vague about taxes. My SIL actually won the trip but was confused about what taxes had to be paid. Probably just the airport taxes and stuff like that then.
Mar 24th, 2006 | 12:05 PM
#5
Joined: Feb 2003
Posts: 6,523
Likes: 0
Just another wild stab in the dark, but I bet it means airport taxes and stuff and not income taxes for a winning.
Sort of like (maybe) when I redeem air miles, I have to pay some airport taxes and GST .
How wonderful to win a trip!!! Have a great time.
Sort of like (maybe) when I redeem air miles, I have to pay some airport taxes and GST .
How wonderful to win a trip!!! Have a great time.
