Car Contest – You enter a Car Contest, you win, it seems to good to be true, but is it? You have been entering Car Contests and finally you hit. Now what? Can you say “Taxes”?
A Car from a Car Contest is among the most popular prizes to win. After all, who would not love to win a car for free? Nothing like a new “Ride”.
Something to keep in mind when entering a Car Contest is the tax burden. Unfortunately, all winnings from a Car Contest or Sweepstakes is considered as a source of income. At least if you are an US resident. In other countries different rules may apply.
So you are lucky enough to be the car contest winner amongst hundreds if not thousands of entries. You now have a new car and it sounds so fantastic. However, a new car can be a nightmare if the winners don’t prepare themselves for the taxes. The amount you will owe depends on your circumstances, but you can estimate taxes around 1/3 of prize value and that is for any car contest. A $40,000 car for $12,000 is a great deal, but you still have to come up with the money to pay the taxes.
After you have confirmed you have won the Car Contest, you need to find a good tax account. Anytime you win a large prize like a car contest or cash amount you should always consult with a tax professional.
A CPA or accountant can give you advice that is tailored to your specific situation, which is vital to ensuring that you are properly prepared. Do not hesitate or procrastinate, make sure you get an accountant right away. Winning a Car Contest is not like winning a gift certificate.
Remember that your Car contest win counts from the day you receive it, not from the date of your win notification. Especially in the case of large wins like a Car from a Car Contest or truck, it can take quite some time for your win to be verified and your prize to be delivered.
Here are your options: You can walk away from the car and wash your hands of it? Are you kidding me! Everyone is saying, “how could you walk away from it?” Again, remember you have to pay those taxes on it. So, unless you have the money for the taxes, that is an option as crazy as it may sound to some people. We know it does not seem right that when you win you have to share it, but you do unfortunately.
Find out the Fair Market Value (FMV) of any Car Contest, sweepstakes prize, including a new car win. The FMV could be far lower than the Approximate Retail Value (ARV) listed by the sponsor – especially if it takes a while for you to take possession of the vehicle. Car values drop after the new car models come out each year, so that 2013 model you won might be less expensive when you take possession in 2014. The minute a car is taken off the lot the value drops immediately. Make sure that your taxes are fair and accurate by finding the lowest possible FMV.
You know the accurate market value and exactly what it is worth and what the taxes will be. You still need to come up with a good chunk of change but do not want to touch your nest egg that you have working on for years. Again, winning a Car Contest sounds great but you have to be realistic.
The other option is to sell it. It might be better to walk away from the Car Contest win. Look at it this way, no matter what you can get for it, it is all free money. You will still end up with several thousand dollars. Your best bet is to try to get the car dealer you’re getting the car from to buy it back from you. Chances are you will get the best rate. Just make sure you get the market value and do not let them tell you otherwise. Its new, it is on their lot, they know, enough said. This way you end up with money in your pocket and the taxes are paid. We strongly suggest getting the money, and sending it out for the taxes before you have time to think about it.
There are other possible options like getting a loan for the taxes but that is up to you. How much do you really like the car or would you like some extra cash? So as you can see there is a lot to take into consideration when entering a Car Contest. Winning a Car Contest can be a blessing but it can also be some what of a hassle.