The outfits are picked, parties planned, and the votes for the 2019 Oscar winners will be tallied. Today, Hollywood’s nominees will gather for the 91st Academy Awards ceremony. And while most hopefuls will not be walking away with the coveted, eight and a half pound (yes, really) statuette…they will still have something to smile about.
This year’s “swag bag“ – given to all Academy Award nominees – has a whopping estimated value of over $100,000. It’s not “just an honor to be nominated,” it pays! But what are the potential tax ramifications of receiving cannabis chocolates, an exotic, luxury small-ship adventure, or a personalized stained glass portrait to name a few of the expensive items in the swag bag?
For starters, the recipients will need to claim the fair market 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 37% rate applies, this year’s swag comes with a hefty tax price tag that could be over $40,000 depending on the exact value of the swag bags. 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 2018. Ready for that refund? File today!
If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent with an average of 15 years experience to get your tax questions answered. A TurboTax Live CPA or Enrolled Agent can review, sign and file your tax return so you don’t have to leave home and you can be ready for the Oscars.