# Federal Tax Rules for Booster Club Raffles: W-2G, 945, and 990

> IRS rules for booster club raffles: tickets are not deductible, Form W-2G at $2,000 and 300 times the wager, 24% withholding over $5,000, and 990 reporting.

- URL: https://boosterclub.org/raffles/federal-rules/
- Section: Raffles
- Updated: 2026-10-08

Federal tax law does not decide whether a booster club may hold a raffle, but it decides what happens afterward: raffle tickets are not deductible, large prizes must be reported to the Internal Revenue Service (IRS) on Form W-2G, prizes over $5,000 require income tax withholding, and raffle receipts appear on the club's annual return. The treasurer owns these rules and should read this page before the board approves any prize worth $2,000 or more.

The primary IRS sources are Publication 3079, *Tax-Exempt Organizations and Gaming* (revised October 2018), and the Instructions for Forms W-2G and 5754 (revised January 2026). Where they differ, the newer instructions control because federal law changed in 2025.

## Key Terms

- **Wager:** the price of one ticket. For bundles, the IRS example: five tickets for $1 is a $0.20 wager per ticket.
- **Winnings:** the cash prize, or the fair market value (FMV) of a noncash prize: what it would sell for between a willing buyer and a willing seller.
- **Proceeds:** winnings minus the wager. Withholding is based on proceeds.
- **TIN:** taxpayer identification number, usually the winner's Social Security number.
- **Form W-2G, Certain Gambling Winnings:** the information return the club files with the IRS and gives to the winner.

## Raffle Tickets Are Not Deductible

IRS Publication 526 states that amounts paid for raffle or lottery tickets, or to play bingo or other games of chance, cannot be deducted as charitable contributions. The club does not issue donation receipts for tickets, print "tax-deductible" on them, or call the ticket price a "donation." A separate gift from a ticket buyer is still a contribution. See [Donation Receipts and Acknowledgment Letters](https://boosterclub.org/taxes/donor-acknowledgments/).

## When the Club Files Form W-2G

For raffles, the club files Form W-2G when the prize meets **both** tests:

1. **Dollar threshold.** For prizes paid in calendar year 2026, the threshold is **$2,000**. It was $600 for prizes paid in 2025 and earlier. The One Big Beautiful Bill Act (Public Law 119-21) raised it, and the IRS will adjust it for inflation starting in 2027. Publication 3079 and many older guides still show $600.
2. **300 times the wager.** The prize must be at least 300 times the ticket price.

The club may subtract the ticket price from the prize when testing the dollar threshold. Separately, **any** prize from which the club withholds tax is reported on Form W-2G, even if the 300-times test is not met.

## Withholding

### Regular gambling withholding: 24% over $5,000

When the proceeds (prize minus ticket price) exceed $5,000, the club must withhold 24% of the **entire** proceeds, not only the amount over $5,000. For raffles this applies whether or not the prize is 300 times the wager. The winner must sign the Form W-2G.

### Noncash prizes and grossing up

A car, trip, or other noncash prize is valued at FMV. If the FMV minus the ticket price exceeds $5,000, withholding applies in one of two ways:

| Method | Who pays | Withholding | Amount on Form W-2G box 1 |
|---|---|---|---|
| 1 | Winner pays the tax to the club before receiving the prize | 24% of (FMV minus ticket price) | FMV of the prize |
| 2 | Club pays the tax for the winner ("grossing up") | 31.58% of (FMV minus ticket price) | FMV plus the tax the club paid |

The tax the club pays is itself income to the winner, so the rate is 24% divided by 76%, or 31.58%. Advertising a prize as "tax paid" or "tax free" commits the club to method 2.

### Backup withholding: 24% when the winner gives no TIN

If a reportable prize is not subject to regular withholding (for 2026, $2,000 through $5,000 and meeting the 300-times test) and the winner gives no correct TIN, the club backup withholds 24% of the prize, optionally reduced by the ticket price. If the club pays the full prize anyway, Publication 3079 says the club owes the withholding.

## Worked Examples (Prizes Paid in 2026)

| Ticket | Prize | 300-times test | Form W-2G? | Withholding |
|---|---|---|---|---|
| $5 | $500 gift card | 100 times: fails | No | None |
| $20 | $3,000 cash | 150 times: fails | No | None (proceeds $2,980) |
| $5 | $2,500 television | 500 times: passes | Yes | None, unless no TIN: backup $600 (24% of $2,500) |
| $100 | $10,000 vacation | 100 times: fails | Yes, because withholding applies | $2,376 (24% of $9,900) |
| $100 | $30,000 car | 300 times: passes | Yes | $7,176 from the winner (24% of $29,900), or $9,442.42 if the club pays (31.58% of $29,900) |
| 3 for $10 | $2,500 cash | $3.33 wager, 750 times: passes | Yes | None, unless no TIN |

## Collecting Winner Information

- Get the winner's name, address, and TIN before paying the prize. Form W-9 is a convenient way to collect it.
- When the prize meets the withholding threshold, the winner must present two forms of identification, one with a photo.
- When two or more people share a winning ticket, or the person collecting is not the actual winner, the recipient completes Form 5754 and the club issues a separate Form W-2G to each winner. Form 5754 stays in the club's records.
- Prizes paid to a nonresident alien follow different rules (generally 30% withholding, reported on Form 1042-S).

## Deadlines

| Filing | Rule | For prizes paid in 2026 |
|---|---|---|
| Form W-2G to the winner | By January 31 of the next year (may be given at the drawing) | February 1, 2027 (January 31 is a Sunday) |
| Form W-2G to the IRS, paper | February 28, with Form 1096 | March 1, 2027 (February 28 is a Sunday) |
| Form W-2G to the IRS, electronic | March 31 | March 31, 2027 |
| Form 945, Annual Return of Withheld Federal Income Tax | January 31 of the next year; February 10 if all tax was deposited on time | February 1, 2027, or February 10, 2027 |
| Deposit of withheld tax | Required by electronic funds transfer if the year's total is $2,500 or more; a monthly schedule depositor deposits by the 15th of the following month | For a car raffle drawn May 9, 2026, by June 15, 2026 |

A club filing 10 or more information returns of all types must file them electronically. Withholding under $2,500 for the year may be paid with a timely Form 945.

## Reporting Raffle Income on the Form 990 Series

- **Gross receipts include every ticket sold**, not the net after prizes, which can push a club past the Form 990-N limit (gross receipts normally $50,000 or less). See [Which Form 990 a Booster Club Files](https://boosterclub.org/taxes/form-990/).
- **Form 990-EZ:** gross gaming income goes on line 6a; prizes and other direct gaming expenses go on line 6c.
- **Form 990:** gross gaming income goes on Part VIII, line 9a.
- **Schedule G, Part III:** required when gross gaming income on Form 990 line 9a or Form 990-EZ line 6a exceeds $15,000. It asks for revenue and prizes by type of game, the percentage of volunteer labor, and the states where the club conducted gaming.
- **A raffle at a gala or dinner:** the instructions conflict. The Form 990-EZ instructions exclude "gaming that is incidental to a fundraising event such as a dinner/dance" from line 6a; the Form 990 instructions require reporting all gaming income from the event on line 9a. The club follows the instructions for the form it files.
- **Nominal-prize raffles:** the Form 990-EZ instructions treat receipts as contributions when a minimum payment is required but prizes have only nominal value.

## Is Raffle Income Taxable to the Club?

Income is unrelated business income only if the activity is a trade or business, **regularly carried on**, and not substantially related to the club's purpose. Publication 3079 treats gaming as unrelated, but gaming "conducted only at an annual fundraising event is not regularly carried on." Weekly gaming is.

Even regular gaming escapes the tax when **substantially all the work is done by unpaid volunteers**. Publication 3079 cites 85% of hours as an unofficial guideline and reads "compensation" broadly: tips, free meals or drinks beyond a mere gratuity, and tuition or fee reductions for working all count. A club that credits raffle work or raffle sales to a family's fees or a student's account creates compensation and a private-benefit problem. See [Private Benefit and Individual Fundraising Accounts](https://boosterclub.org/taxes/private-benefit/).

If gross unrelated business income reaches $1,000, the club files Form 990-T. See [Unrelated Business Income Tax for Booster Clubs](https://boosterclub.org/taxes/ubit/).

## The Wagering Excise Tax Usually Does Not Apply

The federal wagering excise tax (Form 730) and occupational tax (Form 11-C) do not apply to a drawing by a tax-exempt organization unless net proceeds benefit a private individual, such as an operator paid an unreasonable salary or "a percentage of the total wagers" (Publication 3079).

## Common Mistakes

- **Using the old $600 threshold.** Older checklists still say $600. For 2026 prizes the test is $2,000 and 300 times the wager, and any withheld prize is reported.
- **Handing over the car before collecting the withholding.** The club then owes the 24% itself: $7,176 on a $30,000 car.
- **Promising a "tax-free" prize.** The club then owes 31.58%, not 24%, and still files Form W-2G.
- **Reporting net raffle income as gross receipts.** It understates gross receipts and can put the club on the wrong Form 990.
- **Rewarding sellers with credits or perks.** It can defeat the volunteer exception and turn raffle income into taxable income.

## Checklist

### Before the raffle
- [ ] List each prize with its FMV and the ticket price (treasurer)
- [ ] Flag any prize of $2,000 or more that is at least 300 times the ticket price
- [ ] Flag any prize where FMV minus ticket price exceeds $5,000 and decide who pays the withholding
- [ ] Remove "donation" and "tax-deductible" language from tickets and flyers
- [ ] Confirm all workers are unpaid and receive no credits, discounts, or perks

### At the drawing
- [ ] Collect the winner's name, address, TIN, and Form W-9 before releasing a reportable prize
- [ ] Check two IDs (one with a photo) and collect any withholding before handing over the prize
- [ ] Have the winner sign Form W-2G when tax is withheld; use Form 5754 for shared tickets

### After the raffle
- [ ] Deposit withheld tax electronically by the 15th of the next month if the year's total is $2,500 or more
- [ ] Give Form W-2G to each reportable winner by January 31 (February 1 in 2027)
- [ ] File Forms W-2G with the IRS by February 28 on paper (March 1 in 2027) or March 31 electronically
- [ ] File Form 945 by January 31 (February 1 in 2027)
- [ ] Report gross ticket sales and prizes on the Form 990-series return, with Schedule G Part III if gaming income exceeds $15,000

## Related Pages

- [Raffle Prizes, Donated Items, and Vehicles](https://boosterclub.org/raffles/prizes-and-donated-items/) valuing prizes and handling large noncash prizes
- [Which Form 990 a Booster Club Files](https://boosterclub.org/taxes/form-990/) how raffle receipts affect the filing threshold
- [Unrelated Business Income Tax for Booster Clubs](https://boosterclub.org/taxes/ubit/) the full UBIT rules and Form 990-T
- [Booster Club Compliance Calendar](https://boosterclub.org/taxes/compliance-calendar/) W-2G, 945, and 990 dates in one place
- [How to Run a Booster Club Raffle](https://boosterclub.org/raffles/how-to-run-a-raffle/) where the tax steps fit in the event

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*This page is general information for volunteer-run booster clubs. It is not legal,
tax, or accounting advice, and BoosterClub.org is not a law firm, accounting firm, or
government agency. Rules change and vary by state and district. Confirm current
requirements with the IRS, the relevant state agency, the school district, and a
qualified professional before acting. If a fact on this page is out of date, we want
to know.*

## Sources

1. IRS: https://www.irs.gov/pub/irs-pdf/p3079.pdf
2. IRS: https://www.irs.gov/instructions/iw2g
3. IRS: https://www.irs.gov/publications/p1099
4. IRS: https://www.irs.gov/publications/p526
5. IRS: https://www.irs.gov/instructions/i945
6. IRS: https://www.irs.gov/publications/p15
7. IRS: https://www.irs.gov/instructions/i990ez
8. IRS: https://www.irs.gov/instructions/i990
9. IRS: https://www.irs.gov/instructions/i990sg
10. IRS: https://www.irs.gov/publications/p598
11. IRS: https://www.irs.gov/charities-non-profits/form-990-series-which-forms-do-exempt-organizations-file-filing-phase-in