Gift Cards as Prizes: Value, Reporting, and the Fine Print

Gift cards as prizes are the most common giveaway on the internet, and the rules behind them changed in a big way this year. As of payments made on or after January 1, 2026, the One Big Beautiful Bill Act — signed July 4, 2025 — raised the federal Form 1099-MISC reporting threshold for prizes and awards from $600 to $2,000, according to analyses from law firms Verrill and Reed Smith that track prize promotion law.

Prizes handed out during 2025 still fall under the old $600 line.

Here is the part that trips people up. That threshold controls when the sponsor must send you a tax form. It does not change what counts as income. IRS Publication 525 says that if a prize or award is goods or services rather than cash, you include its fair market value in income — and a gift card has an obvious face value, so there is no guesswork about what it is worth.

So the practical effect of the new number is narrower than the headlines suggest: fewer forms in the mail, same underlying tax treatment. Below is how gift cards as prizes actually move through the system, from the official rules that govern the giveaway to the fine print printed on the back of the card.

Why sponsors love giving gift cards as prizes

Gift cards are cheap to fulfill, easy to email, and simple to value. A sponsor does not have to ship anything, insure anything, or estimate what a vacation package is “really” worth. The approximate retail value in the official rules is just the face amount.

There is also a quieter reason. Not every card gets spent. Bankrate’s September 2024 survey of 2,373 U.S. adults found 43% had at least one unused gift card, gift voucher, or store credit — roughly $27 billion nationwide, averaging $244 per person. That average has climbed steadily: $187 in 2023, $175 in 2022, $116 in 2021.

Bankrate also found 34% of adults had lost money on a gift card misstep — 20% let one expire, 17% lost the card, and 12% watched a store close before they could use it.

The key numbers on gift cards as prizes

How the reporting side actually works

Under the new rule, a sponsor generally owes you a Form 1099-MISC only when the total value of prizes it gave you in one calendar year hits $2,000. That is a running annual total per winner, not a per-prize test — five $500 cards from the same sponsor in one year reach the line that a single $500 card does not.

Because of that higher floor, sponsors handing out prizes valued at $1,999 or less generally no longer need to collect your Social Security number or issue a form, according to Verrill’s summary of the change. If a sponsor does need your taxpayer ID and does not get a correct one, IRS Publication 1281 sets backup withholding at 24%.

None of that removes the winner’s own responsibility. The IRS treats prize income as reportable whether or not a form arrives, and how it lands on any specific return depends on the person. A tax professional or IRS.gov is the right place for your own situation.

The official rules page tells you more than you think

Every legitimate U.S. sweepstakes publishes official rules, and they are worth two minutes of reading. Look for the approximate retail value (ARV) of each prize, the total number of prizes, the odds statement, eligibility limits, and the entry deadline. The FTC requires that material terms be disclosed clearly and conspicuously.

Also look for the free method of entry. Sponsors cannot require a purchase to enter or win — a rule enforced by the FTC, state attorneys general, the FCC, and the U.S. Postal Service. When gift cards as prizes are offered, the alternate method is usually a mailed card or a free web form.

The odds line is often the most sobering sentence on the page. It is typically stated as depending on the number of eligible entries received, which is a polite way of saying nobody knows the number until entry closes.

The fine print on the card itself

Once gift cards as prizes land in your hands, a different law takes over. The Credit CARD Act of 2009, implemented through Regulation E §1005.20, says gift certificates, store gift cards, and general-use prepaid cards cannot expire less than five years after issuance or the date funds were last loaded.

Fees are limited too. The Federal Reserve’s final rule bars dormancy, inactivity, and service fees unless the card has gone unused for at least one year, no more than one such fee is charged per month, and the fees are clearly disclosed. Roughly a dozen states go further and ban expiration outright.

One gap federal law does not close: if the issuing retailer goes out of business, a store card may become a claim in bankruptcy rather than spendable value. That is the 12% Bankrate found who lost money exactly that way.

Gift cards as prizes versus the scam that borrows the name

This is where the topic gets serious. Gift cards are a favorite tool of scammers precisely because they move fast and are hard to reverse. FTC data reported by Stateline show consumers lost $217 million in 2023 to scams paid with gift cards, part of a record $15.9 billion in total reported fraud losses in 2025.

The tell is simple and never varies. In a real promotion, gift cards flow to the winner. In a scam, someone tells you that you won and then asks you to buy gift cards and read the numbers over the phone to cover “taxes,” “fees,” or “insurance.” No legitimate sponsor collects anything that way.

The FTC’s 2021 Data Spotlight found Target cards alone accounted for about $35 million paid to scammers — more than double any other brand — with a median loss of $2,500. That pattern is about the scammers, not the retailers whose names they misuse.

If you receive benefits, ask the agency

Prize winnings, including gift cards as prizes, can interact with need-based programs such as SSI, SNAP, Medicaid, Section 8, or unemployment. Reporting requirements generally apply, and the treatment differs by program, by state, and by household circumstances. Nobody online can tell you the outcome for your case.

The reliable move is to contact the agency that runs your benefit directly — SSA at ssa.gov for SSI and SSDI, your state SNAP office through fns.usda.gov, your local public housing authority for Section 8 — and ask how a one-time prize is counted. Getting that answer in writing before you spend anything is worth the phone call.

Frequently Asked Questions

Are gift cards as prizes taxable if I never get a 1099?

IRS Publication 525 says the fair market value of prizes and awards is included in income. The $2,000 threshold determines when a sponsor must issue Form 1099-MISC, not whether the value counts. For your own return, ask a tax professional or check IRS.gov.

Why did the threshold jump from $600 to $2,000?

The One Big Beautiful Bill Act, enacted July 4, 2025, raised it for amounts paid after December 31, 2025, with inflation adjustments starting in 2027. Prizes awarded in 2025 still use the $600 threshold.

Can a gift card I won expire?

Under the CARD Act and Regulation E §1005.20, gift certificates, store gift cards, and general-use prepaid cards generally cannot expire sooner than five years after issuance or the last load of funds. Some states prohibit expiration entirely. Terms on the card control the details.

A sponsor says I won but wants gift cards to release the prize. Is that normal?

No. Under federal law, no purchase or payment is necessary to enter or win a legitimate U.S. sweepstakes, and real sponsors do not collect fees in gift card numbers. The FTC takes reports at reportfraud.ftc.gov, and consumer.ftc.gov/gift-card-scams explains next steps.

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.