How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Tax.appeal.168 Your Own Question
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 3443
Experience:  3+ decades of varied tax industry exp. Tax Biz owner
Type Your Tax Question Here...
Tax.appeal.168 is online now
A new question is answered every 9 seconds

We are raffling a car off to purchase a handicap vehicle through

Customer Question

We are raffling a car off to purchase a handicap vehicle through a non-profit organization in Iowa. Who pays the gift taxes and are they Federal plus state. How much would it be for a 21,000.00 car?


Are you still working on this question?

Submitted: 5 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 5 years ago.

Hello, welcome, and thank you for choosing Just Answer.


If I understand correctly, the car is being raffled off through a non-profit organization. If the organization is tax exempt, meaning it is a 501(c) 3 corporation under the U.S. tax code? If so, the following will apply.


For noncash prizes, the winner must pay the organization 25% of the fair market value of the prize minus the amount of the wager.




Person A purchases a $1 raffle ticket, and Person A wins a car worth $10,000 (fair market value). Because the prize exceeds $5,000 and the fair market value of the car is $10,000, the tax on the fair market value of the prize is $2,499.75 ($10,000 minus $1.00(ticket cost) x 25%). Person A must pay $2,499.75 to the organization that they won the prize from to remit to the IRS on Person A's behalf. To determine the withholding tax amount, take the FMV of the vehicle ($21,000 FMV, then subtract the amount of the raffle ticket cost from the $21,000 and multiply the result by 25%.


On the other hand if the organization raffling off the prize pays the withholding tax as part of the prize, the organization must pay tax not only on the fair market value of the prize less the wage, but also on the taxes it pays on behalf of the winner. The organization must pay withholding tax of 33.33% of the prize's fair market value.


For further information you can refer to the IRS Notice 1340 Tax-Exempt Organizations and Raffle Prizes.


In the state of Iowa, a vehicle purchased for use as a prize is not subject to Iowa sales tax. The winner of the vehicle is not obligated to pay the sales tax either. Also upon showing proof to the County Treasurer that the vehicle was won, the one time registration fee will not be charged. For more information regarding Iowa state taxes, you can refer to the Iowa Department of Revenue.

Related Tax Questions