What is the tax rate on game show winnings in California?
As a lifetime gamer and game show enthusiast, I‘m often asked – just how much do contestants really take home after taxes? Well, I‘ve crunched the numbers and have the inside scoop for California residents.
The short answer: Game show winnings count as ordinary income, meaning they could be taxed at over 50% when including federal and California state taxes. So a $100,000 prize on The Price is Right could easily be cut down to around $45,000 after taxes for a California resident.
Let me explain further…
Federal Tax – Up to 37%
The IRS treats all gambling and game show winnings, including lottery prizes, as ordinary income. This means they get taxed at your top marginal federal income tax rate.
For 2023, the top tax bracket is 37% for incomes above $578,125 (single filers). So a big stack of cash from Wheel of Fortune would see Uncle Sam immediately take up to 37% off the top.
California State Tax – Up to 13.3%
In addition, the California Franchise Tax Board taxes worldwide income of state residents. And yes, this includes every type of prize, gambling or lottery winning.
California‘s top marginal income tax rate is currently 13.3% on income above $1,120,048 (single filers, 2023).
When combined, the total tax rate could be over 50% of your game show prize money!
California Tax Examples
| Prize Amount | Est. Federal Tax (37%) | Est. CA State Tax (13.3%) | Total Taxes |
|---|---|---|---|
| $100,000 | $37,000 | $13,300 | $50,300 |
| $1 million | $370,000 | $133,000 | $503,000 |
As you can see in the table, a $1 million prize would result in over $500,000 going just to taxes! This is why many lottery winners opt for the cash value lump-sum, rather than annual payments.
5 Tax Tips for Game Show Winners
Losing up to 50% of your winnings to taxes feels brutal – but here are 5 perfectly legal ways to help reduce how much you pay:
- Claim deductions – reduce your taxable income by claiming all eligible deductions when you file
- Donate to charity – if you itemize deductions, gifts to 501(c)(3) charities can directly lower your tax liability
- Contribute to tax-advantaged accounts like 401ks – helps defer taxes until retirement
- Invest in opportunity zones – carefully vetted investments can temporarily defer capital gains tax
- Talk to a tax pro! – Get personalized advice to maximize deductions and structure payments optimally
While game shows paint prize winnings as "free cash", winners need to plan ahead to minimize how much gets paid out in taxes. With smart tax planning, you could potentially shave 10-15% off amounts owed.
I hope this insider overview gives fellow gamers a better sense of the reality around taxes on game show winnings. Feel free to reach out with any additional questions! Just remember – even after taxes, winning big is still a jackpot.
