Do You Pay Taxes on a 50/50 Raffle? W-2G and Withholding

Yes, you do pay taxes on 50/50 raffle winnings. The IRS treats the money as gambling income, and every dollar is taxable on your federal return no matter how small the prize or who ran the drawing.¹ There is no exemption for church raffles, school fundraisers, or other charity events, and no minimum that makes a prize too small to count. A $50 win at a local fundraiser is treated the same way as a $5,000 payout.²

The charity running the drawing may be tax-exempt on its side, but that status doesn’t flow through to you. The winner’s cut is ordinary income, subject to federal tax and usually to state tax as well.

How to Report Raffle Winnings on Your Federal Return

Raffle winnings go on Schedule 1 of Form 1040 as gambling income, and the total flows into your income on the main return.³ You report the full prize whether or not the organizer sends you any tax form.

A common assumption is that no form from the organizer means no reporting obligation. That’s wrong. The IRS requires you to report all gambling winnings, including raffle prizes, even when the payer wasn’t required to issue anything.² If the return is audited, “I didn’t get a form” is not a defense.

When the Organizer Sends You a Form W-2G

For 2026, the reporting threshold that triggers a Form W-2G is $2,000, up from $600 in prior years because of an inflation adjustment built into the tax code.⁴ The organizer must file a W-2G when your winnings reach $2,000 or more and are at least 300 times the price of your ticket.⁵

The ticket price counts as the “wager” for this test. Pay $5 for a ticket and win $2,000, and the 300-times test is easily met ($5 × 300 = $1,500, which is less than $2,000), so the organizer issues a W-2G. But if tickets cost $20 each, no W-2G is required unless you win at least $6,000 ($20 × 300).⁴

Bundle pricing works in your favor here. Buy five tickets for $10 and each ticket’s wager is $2, not $10. The IRS treats bundled raffle tickets individually for this calculation, which makes the 300-times threshold easier to reach.⁴

When 24% Gets Withheld From Your Prize

The organizer must withhold 24% of your net winnings, meaning the prize minus your ticket cost, when that net amount exceeds $5,000. For raffles, the $5,000 net threshold is the only trigger for withholding; the 300-times test doesn’t apply here.⁴

Win $6,000 on a $10 ticket, and the organizer withholds 24% of $5,990, roughly $1,438, then pays you the rest. Your W-2G shows both the total prize and the amount withheld, and you claim the withholding as a credit when you file.

If the organizer doesn’t withhold, either because your net winnings fall below $5,000 or because of an oversight, you still owe the tax. You may need to make an estimated tax payment to avoid an underpayment penalty at filing time.³

Backup Withholding

If you don’t give the organizer a valid Social Security number or taxpayer ID, backup withholding applies at 24% on winnings that aren’t already subject to regular withholding. For 2026, backup withholding can kick in on prizes of $2,000 or more.⁴ The simplest fix is to have your SSN with you if you might win anything meaningful.

Noncash Prizes

Some drawings pay in merchandise or travel instead of cash. You owe tax on the fair market value of a noncash prize, and if that value exceeds $5,000 after subtracting your wager, the organizer must withhold 24%.⁴

If You Donate the Winnings Back to the Charity

Handing the money straight back to the nonprofit doesn’t erase your tax bill. The IRS treats the transaction as two separate events: you received taxable gambling income, and then you made a charitable contribution. The two don’t net to zero.

You can deduct the donated amount if you itemize on Schedule A. Beginning in 2026, non-itemizers can also deduct up to $1,000 ($2,000 for joint filers) in cash charitable contributions above the line.⁶ Either way, keep a written acknowledgment from the charity showing the amount and date, especially for gifts of $250 or more.

There’s a less obvious cost. The winnings raise your adjusted gross income whether you donate them back or not, and a higher AGI can affect income-sensitive tax credits, student loan repayment calculations, and Medicare premium surcharges. A large win followed by a full donation can still cost you money beyond the direct tax.

Can You Deduct Losing Raffle Tickets?

Gambling losses from the same tax year can offset raffle winnings, but only if you itemize on Schedule A. Under the current version of the statute, the deductible amount is capped at 90% of your losses for the year and can never exceed your total gambling winnings.⁷

For a casual raffle player, this rarely produces a real benefit. You’d need documented losses from the same year — losing raffle stubs, casino records, losing bets — and you’d need itemizing to beat the standard deduction. If you plan to claim losses, keep every stub, receipt, and bank statement. The IRS expects an accurate log of both winnings and losses, and rough estimates don’t hold up in an audit.³

And the ticket cost itself is not a charitable deduction, even when the raffle benefits a registered charity. The IRS draws a clear line: buying raffle, bingo, or lottery tickets is gambling, not donating, because you receive a chance to win in return.⁸ If you want a deduction, make a separate cash gift to the charity.

Splitting the Prize With Others

When two or more people share a winning ticket, the person collecting the prize should fill out IRS Form 5754, listing each winner’s name, address, Social Security number, and share of the money. The organizer then issues a separate W-2G to each person based on their portion.⁵

Skip that step and the IRS sees one person with the full prize as gambling income. Collect $10,000 and split it informally with a friend later, and you’re stuck with the whole tax bill unless Form 5754 was completed at the time of payment.

For withholding, the total prize, not each person’s share, determines whether the $5,000 net threshold is reached. Five people splitting a $30,000 prize see withholding applied to the full $30,000 before the money is divided.⁵

State Taxes on Raffle Winnings

Federal tax is only the first layer. Most states with an income tax also require you to report gambling winnings, raffle prizes included. A handful of states without a personal income tax add nothing on top, but they’re the exception.

Some states impose their own withholding on gambling winnings, with rates and thresholds that don’t necessarily match the federal rules. Win a raffle in a state where you don’t live and you may owe tax to both your home state and the state where the drawing took place, though most states offer a credit to prevent double taxation. Check your state’s department of revenue for the specifics.

What Happens If You Don’t Report It

The IRS matches W-2G forms against tax returns, so unreported winnings tied to a form tend to get flagged. The accuracy-related penalty for understating income is 20% of the underpayment.⁹ Interest also accrues daily on unpaid tax. The IRS underpayment rate for 2026 started at 7% annually in the first quarter and dropped to 6% in the second quarter.¹⁰

Intentionally hiding gambling income can escalate to fraud, which carries steeper penalties and possible criminal prosecution. For most raffle winners the amounts involved make that risk absurd; the tax on a $500 win is far cheaper than defending an evasion charge. If you missed reporting a prize from an earlier year, filing an amended return is the direct way to fix it before the IRS catches up.

1
IRS. Lotteries and Raffles
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Internal Revenue Service. Five Important Tips on Gambling Income and Losses
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Internal Revenue Service. Topic No. 419, Gambling Income and Losses
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Internal Revenue Service. Instructions for Forms W-2G and 5754 (01/2026)
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Internal Revenue Service. Instructions for Forms W-2G and 5754
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Internal Revenue Service. Topic No. 506, Charitable Contributions
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Office of the Law Revision Counsel. 26 U.S. Code 165 – Losses
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Internal Revenue Service. Publication 526, Charitable Contributions
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Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
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Internal Revenue Service. Quarterly Interest Rates