Insights

Nine Taxable Items That May Surprise You

  1. Buried treasure - If you've picked up some extra cash through luck, skill, or criminal activities, there's a good chance you owe taxes on that money as well.
  2. Scholarships - If you've received a scholarship to cover tuition, fees, and books, you don't have to pay taxes on the money, but if your scholarship also covers room and board, travel and other expenses, that portion of the award is taxable.
  3. Stolen property - If you've robbed a bank, embezzled money, or staged an art heist last year, the IRS expects you to pay taxes on the proceeds. "Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040," the IRS says. Bribes are also taxable, the IRS says.
  4. Gambling winnings - What happens in Vegas doesn't necessarily stay in Vegas. Gambling income includes (but isn't limited to) winnings from lotteries, horse races, and casinos. The good news is if you itemize, your gambling losses are deductible, but only to the extent of the winnings you report as income.
  5. Olympic Victories - Along with a medal and a bouquet, U.S. athletes who win top honors at the Olympics get a check from the U.S. Olympic Committee: $25,000 for gold, $15,000 for silver and $10,000 for bronze. That prize money is taxable by the IRS. Athletes who can demonstrate that their participation in sports is a business can deduct their expenses, such as travel, training, and equipment, against that income.
  6. Proceeds from fantasy sports - Your winning team may be imaginary, but if your brilliant lineup helped you win real money, it's taxable. If you won $600 or more and played through a commercial Web site, you should receive a 1099-MISC reporting your earnings. The IRS will receive a copy of this form, too. Even if you won a private fantasy league among friends, your winnings are considered taxable.
  7. Payment for donated eggs - Every year, thousands of young, healthy women donate their eggs to infertile couples. Payments for this service generally range from $5,000 to $10,000, according to Egg Donation Inc., a company that matches donors with couples. Those payments are taxable income, according to the IRS. Fertility clinics typically send donors and the IRS a Form 1099 documenting the payment.
  8. The Nobel Prize - If you were selected for this prestigious honor, worth $1.08 million in 2014, you must pay taxes on it. Other awards that recognize your accomplishments, such as the Pulitzer Prize for journalists, are also taxable. The only way to avoid a tax hit is to direct the money to a tax-exempt charity before receiving it. That's what President Obama did when he was awarded the Nobel Peace Prize in 2009. If you accept the money and then give it to charity, you probably will have to pay taxes on some of it because the IRS limits charitable deductions to 50% of your adjusted gross income.
  9. Gifts from your employer - If your employer gives you a new set of golf clubs to recognize a job well done (or to persuade you to reject a job offer from a competitor), you'll probably owe taxes on the value of your new irons. More than 50 years ago, the Supreme Court ruled that a gift from an employer can be excluded from the employee's income if it was made out of "detached and disinterested generosity." Gifts that reward an employee for his or her services don't meet that standard, the court said. Gifts that help promote the company don't meet that standard, either.

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