Quote:
Originally Posted by ocolgan
I get a 1090 with the car so I am just adding it to my taxable income, it is not considered a prize so I don't believe that averages out to 38% but let me know if I am wrong.
Just getting the auction warmed up there will be pics soon. This is 1 of 3 cars it is different from all the rest, I believe collectors want this car.
I have also been told don't drive it that will depreciate the value, I think this is a little different from driving the every day car off the lot because we see classic cars in parades and going down the road all the time do people look at the mileage when they buy these cars or do they look at the car.
I may be wrong so help me if I am.
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Look up above. There is a link and a quote from the IRS site if you want conformation.
Even though you have to file a 1090, you also have to file the amount of the market value of the prize (if you sell it, the amount you sold it for) on your 1040 as other income. I had a friend go on the Price is Right a couple years ago right before Bob Barker quit the show and win a car. She had to do all this too. And yes it is considered a prize under the IRS's definition.
When Oprah gave a new car to all of her audience members sometime ago, why do you think there was such an uproar about it on the internet and the news come tax time? That little stunt cost each of her audience members tens of thousands of dollars in taxes.
There are calculators out there you can use but let's say you make $35,000 a year and you sell the car for $40k. Your taxable income then becomes $75,000. According to the calculator that makes you taxes for next year $15,000 but you also have to pay the tax on the 1090, which I think you said was $6,000 so your taxes next year will be $21k. If you sell the car for $60k, your taxes next year will then be a total of $26k including the taxes from the 1090. After looking everything up and running the numbers, I don't see how the average joe could afford NOT to sell the car.