The outfits are picked, parties planned, and the votes for the 2016 Oscar winners tallied. This Sunday, Hollywood’s nominees will gather for the 88th Academy Awards ceremony. And while most hopefuls will not be walking away with the coveted, eight and half pound (yes, really) statuette… they’ll still have something to smile about.
This year’s “swag bag“ – given to Academy Award nominees in five categories – has a whopping estimated value of $220,000. That’s about a 30% increase over last year’s $160,000 bag. It’s not “just an honor to be nominated”: it pays! But what are the potential tax ramifications of receiving a year’s worth of car rentals, a walking tour of Japan, and an all-access VIP trip to Israel for free?
For starters, the recipients will need to claim the value of the bags as ordinary income rather than as a gift. A 2006 agreement reached by the IRS and the Academy of Motion Picture Arts and Sciences created this rule. Assuming the celebrity is in the highest tax bracket and a 39.6% rate applies, this year’s swag comes with a hefty tax price tag nearing $90,000. That may have some celebs seeing a red light rather than the red carpet. On the bright side, recipients of the goodie bags are allowed to donate the gifts to charity and receive a tax deduction, but they still have to claim the gifts as income.
You may not have an Oscar nomination in your future, but keep in mind: gambling, lottery, raffle and sweepstakes winnings are taxable income. TurboTax will ask you about winnings, and will help you every step of the way if you had a very lucky 2015. Ready for that refund? File today!