How to Calculate the Fair Market Value of a Prize You Win
Learn how to value cash, cars and trips for taxes and what to do if your 1099 looks too high.
To calculate the fair market value of a prize you win, use face value for cash, comparable retail sales or pricing guides for merchandise and cars, and the itemized retail cost of airfare, hotel, meals and tours for trips. Measure that value on the date you receive the prize. Fair market value means the price property would sell for on the open market between a willing buyer and willing seller, with neither compelled to act and both having reasonable knowledge of the facts, as the IRS defines it in Publication 561.
Federal tax law requires prize winners to include prize amounts in gross income, with noncash prizes included at fair market value. That rule covers drawings, contests, lotteries, raffles, casinos and similar wins, whether paid in cash, goods or services.
Verification note: Program terms and availability can change. This page was checked against linked sources on November 06, 2026.
What prize income counts?
Treasury regulation text hosted by the Cornell Legal Information Institute requires every U.S. prize winner to include all prize and award amounts in gross income. A noncash prize in goods or services is included at its fair market value.
The IRS Interactive Tax Assistant, citing Publication 525, states that winning a lucky-number drawing, TV or radio quiz, beauty contest or other event creates taxable income. Prizes paid as goods or services count at fair market value. IRS Topic No.
419 similarly treats gambling wins as income, including cash plus the fair market value of cars, trips and other noncash prizes.
How do you value cash, goods and trips?
Use the valuation guidance in Publication 561 from the IRS, which points to comparable sales for property. Apply it by prize type on the receipt date.
- Cash: report the dollar face amount.
- Merchandise: check current retail sales of the same or highly similar item in your market.
- Cars: use dealer quotes, pricing guides and sales of the same year, make, model, mileage and condition.
- Trips: add the separate retail prices for airfare, hotel, meals, transfers and tours you actually received.
What if the form or retail value looks too high?
A payer that pays $600 or more in prizes not for services must report it in Box 3 Other Income on Form 1099-MISC, according to the IRS answers on Form 1099-MISC. You must still report the actual fair market value on Schedule 1 even if no form arrives. Contest rules often list an approximate retail value that is higher than taxable fair market value.
CountingWorks/TaxCPE notes in its 2025 tax-education update on noncash prizes that winners should save dated screenshots, dealer or Kelley Blue Book comps, and hotel and airfare quotes, then ask the sponsor to correct an overstated 1099. Keep those records with your tax file.
Can you refuse a prize to avoid tax?
Yes, timing and possession control the result. The IRS Interactive Tax Assistant, citing Publication 525, explains that refusing a prize before taking possession avoids income entirely. Once accepted, the fair market value is taxable even if you later sell, gift or donate the item.
Decide before you sign acceptance papers, arrange delivery or take the trip.