Non-Cash Prizes: How Merchandise Winnings Are Handled

Non cash prizes — cars, trips, furniture, gift cards, even houses — are treated by the IRS as ordinary income at their fair market value, and the value the sponsor assigns in its official rules is the number that drives everything else. IRS Publication 525 states plainly that if a prize or award you receive is goods or services, you must include the fair market value in your income.

The reporting rules just changed. Under the One Big Beautiful Bill Act signed July 4, 2025, the Form 1099-MISC threshold for prizes and awards rose from $600 to $2,000 starting in tax year 2026, and the IRS will index it for inflation from 2027 forward. That is a real shift — but it changes paperwork, not what counts as income.

The rest of this piece walks through how sponsors value merchandise, when tax gets withheld before you ever touch the prize, what the biggest televised giveaway in the country actually pays out, and how prize offers get abused by imposters. Everything below comes from official rules, IRS guidance, the FTC, or major news reporting.

How sponsors put a price tag on non cash prizes

Every set of official rules lists an “approximate retail value,” or ARV. That figure is the sponsor’s stated fair market value, and it is what appears on any tax form you receive. It is not a negotiation — it is the number the sponsor already published before the drawing happened.

ARV is why two prizes that feel similar can land very differently at tax time. A $900 gaming console bundle and a $9,000 vacation package both arrive with no cash attached, but the vacation carries ten times the reported value. Reading the ARV line in the rules before you enter tells you the size of the obligation you’d be accepting.

The 2026 reporting change for non cash prizes

Sponsors report prizes on Form 1099-MISC, Box 3 (“Other Income”), when no wager was involved. Sweepstakes and contests fall here. Starting with tax year 2026, that form is generally required once a winner’s combined prize value for the year reaches $2,000 — up from the long-standing $600 floor.

Here is the part people miss: the IRS treats the fair market value of non cash prizes as taxable income whether or not a form arrives. A smaller prize that falls below the new threshold still counts. The higher threshold reduces the number of forms mailed, not the underlying income.

Prizes involving an actual wager are different. IRS instructions for Form W-2G direct payers to use that form instead when a bet was placed — casino jackpots, lotteries, wagering pools. Contest and sweepstakes prizes with no entry wager stay on the 1099-MISC track.

When tax comes out before the prize does

For wagering-based winnings, the IRS instructions for Forms W-2G and 5754 (revised January 2026) require 24% regular gambling withholding when the fair market value of a noncash payment exceeds $5,000 after subtracting the wager — including a car won in a sweepstakes, wagering pool, or lottery. The payer must account for the FMV in reporting and withholding.

Because there’s no cash to withhold from, the instructions describe two paths: the winner pays the withholding to the payer at 24% of FMV minus the wager, or the payer covers it, in which case the rate grosses up to 31.58%. That second number surprises people, and it is straight from the IRS instructions.

A real example: the HGTV Dream Home 2026

HGTV’s published 2026 rules value the grand prize at $2,448,933 total: a Charlotte, North Carolina home with furnishings, fixtures, artwork and merchandise at an approximate retail value of $2,348,933, plus $100,000 delivered by electronic funds transfer. HGTV announced Eileen Reimer of Atlanta, Georgia as the 2026 winner.

The same rules offer a cash option of $750,000 instead of taking title to the home. Winners who choose it still receive the $100,000 cash prize, bringing the total ARV to $850,000. That’s a published, official alternative — the sponsor writes it into the rules precisely because a house is the hardest kind of prize to actually keep.

Why winners so often trade non cash prizes for cash

The surprising-but-true part: hanging onto a dream house is rare. Homes.com, citing HGTV, reported that only one of the first ten Dream Home winners managed to keep the property, and that of 21 winners across the giveaway’s history, about six — roughly 28% — lived in the home more than a year.

Taxes are the reason most often cited. CNBC estimated the tax bill on the 2019 HGTV Dream Home at $907,677. Add property taxes, insurance and upkeep on a multimillion-dollar house, and a smaller cash option can be the more workable outcome for someone whose income didn’t change.

This is the core tension with large non cash prizes generally. The prize itself doesn’t generate money to cover its own reported value. Winners of cars, boats and vacation packages face a scaled-down version of the same arithmetic, which is why sponsors of big-ticket giveaways increasingly publish a cash alternative.

Non cash prizes and benefit programs

If you receive means-tested benefits, reporting requirements generally apply to prizes, and how a prize is treated depends on the specific program and your situation. Social Security lists the SSI countable resource limit at $2,000 for an individual and $3,000 for a couple — figures unchanged since 1989 — and prizes can count as income in the month received.

Programs differ. SSI, SNAP, Medicaid, Section 8 and unemployment each have their own rules on income, resources and reporting timelines, and SSDI works differently from SSI. Nobody should assume a single answer covers all of them. Contact the agency administering your benefit directly and describe the prize and its stated ARV; that agency is the only source that can tell you how your case is handled.

Real offers versus imposters using a famous name

The FTC’s consumer guidance on non cash prizes is short and clear: real prizes are free. If someone tells you to pay a fee for “taxes,” “shipping and handling,” “processing” or “customs duties” before you can receive a prize, the FTC says you are dealing with a scammer. Legitimate sponsors do not collect a payment to release winnings.

The FTC also warns that scammers deliberately borrow the names of well-known sweepstakes companies, including Publishers Clearing House, to borrow their credibility. That’s an imposter using the brand — not the company itself. Suspected prize scams can be reported at ReportFraud.ftc.gov.

Separately, the real company reached a settlement with the FTC announced June 27, 2023, agreeing to pay $18.5 million to consumers and overhaul its sweepstakes entry process over allegations involving misleading entry design. Nearly 282,000 customers received refund checks. That was a consumer-protection settlement over entry practices, entirely distinct from the imposter scams that misuse the name.

Frequently Asked Questions

Do I owe tax on a prize if no form arrives?

IRS Publication 525 says the fair market value of goods or services you receive is included in income. The 2026 rise in the 1099-MISC threshold to $2,000 changes when sponsors must file the form, not what the IRS treats as income. A tax professional can address your specific return.

Can I ask a sponsor to lower the stated value?

The approximate retail value is set in the official rules before the drawing. It’s the sponsor’s published fair market value figure, and it’s what flows onto any tax form. Reading the ARV before entering is the practical step — it tells you what you’d be accepting.

Why do some non cash prizes have tax withheld and others don’t?

IRS instructions for Form W-2G apply 24% withholding to wagering-based noncash winnings whose fair market value exceeds $5,000 after the wager. Sweepstakes prizes with no wager are reported on Form 1099-MISC, Box 3, which carries no automatic withholding.

Can I turn down a prize I can’t afford to keep?

Official rules govern this, and terms vary by promotion — some publish a cash alternative, as HGTV’s 2026 rules do at $750,000, while others don’t. The rules document for that specific sweepstakes is the authority. For how declining or accepting affects your taxes or benefits, consult the IRS or the relevant agency.

Know the Rules Where You Live

Sweepstakes and prize rules change from state to state — what a sponsor can offer, how prizes are handled, and what protections you have. Pick your state to see the exact rules that apply where you live.

See Sweepstakes Laws in All 50 States →

Sources & How to Verify

The facts on this page are drawn from official government and primary sources. Rules and figures change, so always confirm the current details with the official agency or the promotion’s own published rules.

• FTC Consumer Advice: consumer.ftc.gov — prize, sweepstakes, and lottery scam guidance
• IRS: irs.gov — how prizes and winnings are treated as income
• Social Security Administration: ssa.gov — what SSI recipients must report
• The promotion’s official rules: every legitimate sweepstakes publishes them — the rules page is always the final word

Content last reviewed August 2026. If you notice outdated information, please contact us.

Related Guides

• Sweepstakes Laws by State (50-State Guide)
• More in This Category
• Sweepstakes Resources
• Scam Checks
• Sweepstakes Tax Calculator
• All Active Sweepstakes

Informational only — not legal, tax, or financial advice. Win Big Daily is an independent educational resource. Prize rules, tax treatment, and benefit-program requirements vary by state and program and change over time, so always verify the current details with the official agency, the promotion’s published rules, or a qualified professional before acting. If a topic involves government benefits, contact the program office about your specific situation.