Booster Club Raffle Prizes, Donated Items, and Vehicles

Donated or Purchased

State rules on prize types:

• Cash prizes: Texas prohibits money prizes in any raffle. California has no limit on prize value.
• Possession: Texas requires the club to own or possess the prize, or to post bond for its full value with the county clerk, before the raffle.
• Restricted items: alcohol, firearms, tobacco, and similar prizes may be barred by state law or district policy, and are a poor fit for a school audience. Check both before accepting them.

See the club’s state page for its rules.

Valuing Prizes

Every prize is valued at fair market value (FMV): “the price that property would sell for on the open market,” agreed between a willing buyer and a willing seller who both know the relevant facts (IRS Publication 561). Practical rules:

• New merchandise: the regular retail price.
• Gift cards and certificates: face value.
• Trips and experiences: the price a member of the public would pay for the same package, itemized (airfare, lodging, tickets).
• Services (a photo session, lessons): the provider’s standard price.
• Used items: what similar items sell for, not what the donor paid or an insurance replacement value.

Record each prize’s FMV and how it was determined in the raffle file. FMV drives the federal tests: Form W-2G for a 2026 prize of $2,000 or more that is at least 300 times the ticket price, and withholding when FMV minus the ticket price exceeds $5,000. See Federal Tax Rules for Raffles.

Thanking Prize Donors

A business or family that donates a prize is a donor to the club. The people who buy tickets are not; Publication 526 states that raffle ticket purchases are not deductible.

1. Written acknowledgment. For a donation of $250 or more, the donor needs a written acknowledgment to claim a deduction. IRS Publication 1771 requires it to include the club’s name, a description (but not the value) of donated property, and whether the club provided goods or services in return. The club sends one for every prize donation as good practice.
2. Services are different. Donors generally cannot deduct the value of services they give to a charity. The acknowledgment describes the service; it does not state a value.
3. Recognition for business donors. Listing a business as a prize donor on the ticket or program is acknowledgment. Promotional language, prices, or calls to action can turn it into advertising. See Sponsorships vs Advertising.
4. High-value donated property. If a donor claims a deduction over $5,000 for an item, the donor may ask the club to sign Section B of Form 8283. If the club then sells, exchanges, or “otherwise dispose[s] of (with or without consideration)” that item within three years, the club must file Form 8282 within 125 days. Awarding the item as a raffle prize is a disposition. The club tells the donor up front that the item will be raffled.

See Donation Receipts and Acknowledgment Letters for templates.

Large Prizes and Withholding

When a noncash prize’s FMV minus the ticket price exceeds $5,000, federal income tax must be withheld before the prize is handed over:

• The winner pays: 24% of (FMV minus ticket price), collected by the club before delivery.
• The club pays: 31.58% of (FMV minus ticket price). This applies whenever the club advertises the prize as “tax paid.”

Example. A $100 ticket wins a $30,000 car. Proceeds are $29,900. If the winner pays, the club collects $7,176 by cashier’s check before releasing the car. If the club pays, it owes $9,442.42 and reports $39,442.42 as winnings on Form W-2GForm W-2GCertain Gambling Winnings: the information return a club files with the IRS and gives to the winner when a raffle or other gaming prize reaches the federal reporting threshold.All terms. Either way, the club deposits the tax and files Form 945.

The board decides who pays before the raffle is advertised and prints it in the rules. A winner who cannot pay the withholding cannot take the prize until arrangements are made, so the rules state what happens then (for example, a deadline after which the prize is redrawn), consistent with state law.

Vehicles

A vehicle raffle adds title and registration steps to the tax rules.

1. Hold the title. The club owns the vehicle, with title in the club’s name, before selling tickets (or posts bond where the state allows it, as Texas does). A vehicle “promised” by a dealer is not in the club’s possession.
2. Insure it. Insure the vehicle from the day the club takes it until title transfers.
3. Collect paperwork and withholding first. Form W-9, two IDs (one with a photo), the withholding, and the winner’s signature on Form W-2GForm W-2GCertain Gambling Winnings: the information return a club files with the IRS and gives to the winner when a raffle or other gaming prize reaches the federal reporting threshold.All terms come before the keys.
4. Transfer title. Sign the title over to the winner and complete the state’s transfer forms. Registration fees and any sales or use tax on the transfer vary by state; the rules sheet states that the winner pays them.

Donated vehicles

A charity that receives a donated car, boat, or airplane with a claimed value over $500 must file Form 1098-C and give the donor a written acknowledgmentWritten acknowledgmentThe receipt a donor needs from the club to deduct any single gift of $250 or more. It names the club, states the cash amount or describes a noncash gift, and says whether the donor received anything in return.All terms within 30 days. Two cautions apply:

• A vehicle donated from a dealer’s inventory is not a “qualified vehicle” for Form 1098-C. The dealer gets a standard written acknowledgment.
• The Form 1098-C instructions address vehicles the charity sells, uses significantly, improves, or transfers to a needy individual. They do not address a vehicle awarded as a raffle prize. A club planning to raffle a vehicle donated by an individual gets advice from a tax professional on the Form 1098-C entries before accepting it.

Prize Substitutions, Cash Options, and Unclaimed Prizes

• Substitutions. Award the prizes advertised. California’s Attorney General directs people to local law enforcement when a different prize is substituted for the one advertised. If a donor backs out, the rules sheet should allow a substitute of equal or greater value.
• Cash options. Offering cash instead of the prize is not allowed in Texas, which bans money prizes. Where cash prizes are allowed, the cash the winner takes is the prize for tax purposes.
• Unclaimed prizes. Publish a claim deadline and what happens after it (redraw or retain), and check the state’s raffle rules for anything on unclaimed prizes.

Accounting software built for small nonprofits can track each donated item from pledge to acknowledgment, which keeps the prize list, the donor letters, and the raffle report consistent.