Raffles as an IRS Donation Deduction

Raffles may be fun, but they don't offer much of a tax deduction.

Raffles may be fun, but they don't offer much of a tax deduction.

Raffles are a classic fund-raiser for charities and schools. Buying a ticket lets you help your community, but it doesn't help you claim a deduction for a charitable donation. The IRS classes money spent on raffles and lotteries as "contributions from which you benefit" and therefore it is generally not deductible. If you win the raffle, you may even end up owing tax.

Gambling

Entering a raffle -- or a lottery, or playing charity bingo -- is a form of gambling. If you win anything -- cash, a vacation trip, a bottle of wine -- the IRS expects you to report that income. For noncash winnings, the income you gain equals the fair market value of whatever you won. If you win something worth more than $600, the charity should send you and the IRS a 1099 form reporting your income. You pay regular income tax on whatever you win.

Gambling Losses

One way to write off your raffle ticket is as a gambling loss. The IRS allows you to write off gambling expenses, but only up to the amount of your winnings. If you buy $20 worth of tickets and win a $100 prize, for example, you can take a $20 deduction; if you lose and don't have other winnings, you can't claim anything. You have to itemize deductions on Schedule A to claim gambling losses. If you take the standard deduction, you're out of luck.

Giving Back

When you win the raffle, one way to claim a deduction is to give your prize back to the charity. It won't help your overall tax picture because once you accept the prize it counts as income. The most your donation can do is reduce the amount of added tax you pay. If you win property that would be subject to capital gains tax if you sold it, you can deduct only 30 percent of its value when you donate it.

Claiming Losses

One cheap lottery ticket isn't worth itemizing deductions for. If you itemize anyway, however, to deduct medical bills or mortgage interest and you have gambling income to offset, claiming even a small gambling loss cuts your taxes. To write off your losses, you have to keep records showing when you incurred them, as well as receipts or the actual tickets to prove that your losses are legitimate.

 

About the Author

Author of two film reference books, "Cyborgs, Santa Claus and Satan" and "The Wizard of Oz Catalog." Published in Air & Space, Backpacker, Newsweek, The Writer, and multiple trade journals (can fax samples if requested, don't have them available digitally)

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