# Taxes on prize winnings

**URL:** <https://boards.straightdope.com/t/taxes-on-prize-winnings/160770>\
**Category:** Factual Questions\
**Created:** [March 12, 2003, 6:40am UTC](https://boards.straightdope.com/t/taxes-on-prize-winnings/160770 "2003-03-12T06:40:24Z")\
**Posts on this page:** 3\
**Page:** 2

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**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\
**Post date:** [March 14, 2003, 12:09pm UTC](https://boards.straightdope.com/t/taxes-on-prize-winnings/160770/21 "2003-03-14T12:09:54Z")

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Hmmm… slight OT – what’s the likely tax situation of that bozo terrorist who’s taking the $27 million and going to England?

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**Author:** ![R.P.McMurphy](https://avatars.discourse-cdn.com/v4/letter/r/7993a0/32.png) [@R.P.McMurphy](https://boards.straightdope.com/u/R.P.McMurphy)\
**Post date:** [March 14, 2003, 1:23pm UTC](https://boards.straightdope.com/t/taxes-on-prize-winnings/160770/22 "2003-03-14T13:23:35Z")

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What you DON’T want to win is a vacation. If they report the value of the “vacation” at retail value (full fare ticket, rack rate on the hotel room, etc.) the taxes on the vacation could be greater than a deal you could get from a travel agent or over the Internet.

A lot of people have won prizes and learned to regret it.

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**Author:** ![Cliffy](https://avatars.discourse-cdn.com/v4/letter/c/59ef9b/32.png) [@Cliffy](https://boards.straightdope.com/u/Cliffy)\
**Post date:** [March 14, 2003, 4:33pm UTC](https://boards.straightdope.com/t/taxes-on-prize-winnings/160770/23 "2003-03-14T16:33:41Z")

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> [@](#):
>
> \*Originally posted by Boyo Jim \*  
> \*\*This us not entirely correct. There are forms of “wealth accretion” that do not count as income and are not taxed.  
> \*\*

1. Inherited money is a gift and, as I mentioned in my earlier post, gifts are the one primary exception.

2. Lawsuit proceeds. I admit Congress and the courts are not quite as thoughtful about the question as they should be, but in general legal judgments are taxable when and only when they represent an accretion to wealth. Lawsuit winnings for non-economic, non-punitive damages (such as pain and suffering damages) are not an accretion to wealth, and typically they are not taxable. They are meant to be a penny-for-penny replacement for the injuries caused by the defendant. (Of course, they’re rough estimates in the extreme, but theoretically, the arm you lost, the claim for the injury to the arm before you go to trial, and the money you’re paid in damages for the arm after you win at trial are all worth exactly the same amount.)

Economic damages such as lost wages or recompense for a breach sales agreement are accretions to wealth as they replace payments that would have been taxable had there been no incident which lead to the suit. Punitive damages are a windfall to the plaintiff; they represent an accretion to wealth and they are taxable.

–Cliffy

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