I'm pretty new here, but I've been entering sweepstakes here and there for the past year or so. I haven't gotten too serious about it, but now that I'm doing it more often I'm wondering about tax issues. I know these questions probably get asked all of the time, so I hope I'm not annoying you! :)
Specifically, I started wondering about the taxes on the Century 21 sweepstakes where you can win a home up to $200k. Now, I know I probably won't win, but I'm just wondering how this works. At first I was thinking I would just have to worry about property taxes (which would still be a big deal, considering we are pretty low income and our house isn't worth much), but then I read something about having to pay 25% of the Fair Market Value on a house sweepstakes win. I also read somewhere that sweepstakes wins count as income too. So, assuming you won a $200k house, are you going to have to pay property taxes, plus $50,000 up front, PLUS income taxes on it? For instance, say we make $30,000 for the year, but win a $200,000 house. As far as the IRS is concerned did we make $230,000 that year?
Another thing I'm wondering - say you win $20,000 in cash. Do you just have to report that with your income taxes, do they take taxes out and then you also have to report it as income, or how does that work?
I hope I haven't been confusing. I'm just wondering if it's worth my while to enter large sweepstakes since I don't have any money to spend on taxes. I appreciate any help!