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

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.

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:

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)

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

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.
• 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-EZForm 990-EZThe short annual return a tax-exempt club files with the IRS when its gross receipts are under $200,000 and its total assets are under $500,000, and it does not file Form 990-N. It reports revenue, expenses, the balance sheet, programs, and officers.All terms 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.

If gross unrelated business income reaches $1,000, the club files Form 990-T. See Unrelated Business Income Tax for Booster Clubs.

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).