Fun Fact – Charity Raffle Tickets Are Not Tax-Deductible
- How I inaccurately thought I could get a tax deduction and win a raffle (I was wrong)
- Bought a $170 Charity Raffle Ticket with big prizes and good causes
- Learned Charity Raffle Tickets Are Not Tax-Deductible
My Idea: Buy Charity Raffle Tickets to donate to good causes and win big prizes
In all honestly, I thought it was a genius idea. I started to see commercials and ads for charity raffles around my hometown of Denver, Colorado as we approached tax season. Which is typically when most people start thinking about their charity donations.
I’ll admit I’ve never done a charity raffle so I wasn’t entirely sure what it entailed or how it worked but the basic concept was clear. I had an opportunity to buy a raffle ticket with my extra money to support a good cause and maybe, possibly, if I was lucky, win some cool prizes!
I Tried It: I Bought $170 Worth Of Raffle Tickets For A Charity
One particular commercial dug into my brain like a song you can’t forget. The commercial was for Mile High Raffle, a raffle to support the Boys and Girls Club of Metro Denver. It promised glorious prizes and impressive odds. It captured me with visuals of dream houses and exotic vacations. I was hooked.
I immediately pulled out my phone (as one has on them at all times) and dived into their website. It didn’t disappoint with their headlines of prizes:
- Dream House or $2,000,000 cash
- New Tesla Model S + $25,000 cash
- South African Safari or $10,000 cash
- Additional Trips to Greece, Bali, Italy, Maldives and more.
In all, they host a large number of prizes and boast 1 in 20 odds. Which are likely inflated due to all the smaller prizes like vacuum cleaners and headphones, but I was already too deep. I was in the “What If” mindset of lottery gamblers after a Powerball purchase. I wanted my shot.
So I bought a ticket!
I bought a single ticket at $150 (minimum) and an additional $20 ticket for their “weekly” prize drawings because I wanted to play the entire field. I wanted to jump in with both feet to be washed over with the “What If” possibilities. I knew the only way I could win was if I played, and that’s how I justified this large purchase knowing the money went to a good cause.
Learned Charity Raffle Tickets Are Not Tax-Deductible
In my haste to buy a raffle ticket (this is my first charity raffle ticket ever), I missed the FAQ disclaimer at the bottom of the Charity Raffle’s website.
“Are raffle tickets tax-deductible? – No, The IRS does not allow raffle tickets to be a tax-deductible contribution”
They were not mischievous nor did not hide the fact that buying a charity raffle ticket was not tax-deductible, I simply missed it completely on my own.
I don’t believe this would have deterred me in any way from buying a raffle ticket, but I would not have so mistakenly thought I could use a tax deduction if I lost.
The tiniest speck of light in this story is that it encouraged me to dive down the rabbit hole to understand more about the tax implications of charity raffle tickets.
Update 1: It’s been 4 weeks since the raffle began and it continues till the grand prize (Dream House or $2,000,000) is drawn on May 8th, 2020. So far there have been 9 winners in the early bird drawings, but none were me. I’ll let you guys know if I win anything!
Update 2: The contest is now over and I won zero prizes. I feel like a kid at a carnival just beginning to understand how significant the odds are stacked against him. My hopes were risen so high with their 1 in 20 odds of winning, that I lost sight of 19 in 20 people lose. Today I lost and I don’t even have a tax deduction to show for it.
Charity Raffle Tickets Are More Considered Gambling
Websites like Zacks provided some of the most clarity on how the IRS treats charity raffle tickets. Basically, the IRS treats it like gambling or specifically “nondeductible gambling losses” because you’re not selflessly donating to charity, but rather playing the odds in hopes of receiving something of greater value in return.
It just happens that instead of the money going to a casino, it goes to a charity. Since the donation is not in the spirit of a selfless donation, it’s not considered a tax deduction.
Fun Fact: In a similar fashion, when you pay for a ticket at a charity dinner. You can deduct the price of your ticket for taxes, but you must first subtract the value of your dinner/drinks. The reasoning is that only the amount actually going to charity (not feeding you) should be tax-deductible.
Something additional to consider is that while you can’t take a tax deduction from buying a charity raffle ticket. If you actually win any of the prizes, you are required to report those additional earnings on your taxes. Much like how buying a charity raffle ticket is “nondeductible gambling losses” if you win it’s considered “taxable gambling winnings” and must be reported as other income. Ask your local tax professional if you have any questions.
The Wrap Up
Essentially if you want a tax deduction, don’t do a charity raffle! Only do a charity raffle if you want to potentially win cool prizes but feel OK receiving nothing in return (remember 19 in 20 people win nothing). It’s a fun, different, and potentially exciting way to donate to charity, but don’t expect it to help during tax season.
Wallet Squirrel is a personal finance blog by best friends Andrew & Adam on how money works, building side-hustles, and the benefits of cleverly investing the profits. Featured on MSN Money, AOL Finance, and more!
Essentially if you want a tax deduction, don’t do a charity raffle! Only do a charity raffle if you want to potentially win cool prizes but feel OK receiving nothing in return .