9 Surprising Things That Are Taxable

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If you work for a living, you know that your wages are taxable, and you’re probably aware that some investment income is taxed, too. But the IRS doesn’t stop there.

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. Here are nine things you may not know are taxable.

Buried Treasure

In February of 2013, a northern California couple were walking their dog on their rural property when they discovered six cans filled with 19th-century gold coins. Appraisers say the coins are rare and could be worth up to $10 million. The couple has wisely chosen to stay anonymous, but they won’t be able to hide their good fortune from the IRS. Found property that was lost or abandoned is taxable at its fair market value in the first year it’s your undisputed possession, the IRS says. That means the couple may have to pay federal taxes of 39.6% on their windfall, plus California state tax of up to 13.3%.

The precedent for the IRS’s “treasure trove” rule dates back to 1964, a couple discovered $4,467 in a used piano they had purchased for $15. The IRS said the couple owed income taxes on the money, and a U.S. District Court agreed.


If you receive 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.

Likewise, students who receive financial aid in exchange for work, such as serving as a teaching or research assistant, must pay tax on that money, even if they use the proceeds to pay for tuition.

Stolen Property

If you 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.

In reality, few criminals report their ill-gotten gains on their tax returns. But if you’re caught, the feds can add tax evasion to the list of charges against you. That’s what happened to notorious gangster Al Capone, who served 11 years for tax evasion. Capone never filed a tax return, the IRS says.

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 payer is required to issue you a Form W2-G (which will also be reported to the IRS) if you win $1,200 or more from bingo or slot machines, $1,500 or more from keno, more than $5,000 from a poker tournament, or $600 or more at a horse track if it’s more than 300 times the amount of your bet. Even if you don’t receive a W2-G, the IRS expects you to report gambling proceeds on line 21 (other income) of your 1040.

The good news: If you itemize, your gambling losses are deductible, but only to the extent of the winnings you report as income. For example, if you won $4,000 last year and had $5,000 in losing bets, your deduction for the losses is limited to $4,000. You can’t deduct the balance against other income or carry it forward. Report the deduction on Line 28 (other miscellaneous deductions) on Schedule A.

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.

In February, Rep. Blake Farenthold (R-Tex.) introduced legislation that would exempt Olympic prizes and awards from taxes. “This needless tax illustrates how complicated and burdensome our tax code has become,” Farenthold said in a statement. “We need a fairer system for all, and eliminating this unnecessary tax burden on our athletes is a good way to start.”

Proceeds From Fantasy Sports

Your winning football (or baseball) 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.

The rules for fantasy football fortunes are the same as those for gambling income. You can deduct your losses (entry fees in leagues you didn’t win) against your gains, as long as they occurred in the same year.

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.

A California woman who received $20,000 for donating eggs on two occasions has filed a suit challenging the IRS position. In a case pending in U.S. Tax Court, Nichelle Perez maintains that the payment was for pain and suffering and thus shouldn’t be treated as income.


Bitcoins are a form of online digital currency that can be used in place of money issued by central banks. They’ve been in the news lately because a large number of them have gone missing from exchange sites, highlighting the risks of using a currency that exists entirely online and is unregulated.

But bitcoins aren’t just a new way to pay for things. Because only a finite number can be created, their value fluctuates like any other currency, depending on demand. That has attracted speculators, who buy and sell bitcoins for profit. Tax experts say those currency gains are taxable under the U.S. tax code. It’s unclear, though, whether your proceeds from the sale of bitcoins should be treated as capital gains or ordinary income. The distinction is significant because the top long-term capital-gains rate is 23.8%; the top rate for ordinary income is 39.6%. The IRS says it’s studying the issue.

The Nobel Prize

If you were selected for this prestigious honor—worth $1.2 million in 2013–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.

Prizes from your employer may not get your picture in the newspaper, but they’re taxable, too. For example, if your company gives you a trip to Hawaii because you met your sales goals, the fair market value of the vacation is considered taxable income.

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