Oscar nominees who accept gift bags have to claim them on their federal income taxes because the IRS treats these swag bags as income.
The 95th Academy Awards, also known as the Oscars, will be held on Sunday, March 12, at the Dolby Theatre in Los Angeles.
This year’s top acting and directing nominees will be gifted swag bags filled with goodies that are valued at nearly $126,000. But online searches show that many people are wondering if these gift bags are taxable.
Are Oscar gift bags taxable?
Yes, Oscar gift bags are taxable.
WHAT WE FOUND
Oscar nominees who accept gift bags have to claim them on their federal income taxes. That’s because the IRS treats these swag bags as income, and says they don’t meet the definition of gifts.
“These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gift bags do not do so solely out of affection, respect or similar impulses for the recipients of the gift bags,” the IRS says on its website.
In the early 1970s, the Academy of Motion Picture Arts and Sciences established its gift basket program as a way to say thank you to presenters and performers at the Oscars. The gift baskets often included luxurious trips, expensive jewelry and other fancy gadgets. However, in April 2006, the Academy said it would no longer give out gift baskets after facing backlash from the IRS because the agency said that movie stars hadn’t been paying taxes on the gifts they received.
By Aug. 17, 2006, the IRS and the Academy reached an agreement to resolve the tax issues in relation to the gift baskets that were given away at the Oscars through 2005. The agreement let any person who received an Oscar gift basket prior to 2006 off the hook for paying taxes on the gifts.
“There’s no special red-carpet tax loophole for the stars. Whether you’re popping the popcorn, sitting in the audience or starring on the big screen, you need to respect the law and pay your taxes,” former IRS Commissioner Mark Everson said in a statement.
According to the IRS, any person who accepts a gift bag at an awards show “has received taxable income equal to the fair market value of the bag and its contents and must report that amount on his or her federal income tax return.” If a person redeems a non-transferable gift certificate, a voucher for a trip or a personal service that was found in the gift bag, they must also report it on their taxes.
Gift bag recipients are allowed to donate the gifts to charity, and may be able to receive a tax deduction. But the IRS says they still have to claim the gifts as income on their tax return.
Distinctive Assets, a Los Angeles-based entertainment marketing company that is not affiliated with the Academy, has been distributing gift bags to the top acting and directing nominees at the Oscars for over 20 years. Their 2023 “Everyone Wins” nominee gift bag is valued at nearly $126,000. It includes skincare products, fragrances, trip vouchers, and even cosmetic surgery procedures.
In an email, Distinctive Assets founder Lash Fary told VERIFY the gift bags his company gives out are considered business gifts by the IRS.
“All business gifts are taxable. The IRS bases any applicable tax on the fair market value of a business gift,” Fary said. “However, the vast majority of our gift bag's value is comprised of gift vouchers or invitations to partake in services. That means that unless a nominee uses a particular gift certificate the fair market value of that gift is zero (with no tax consequence whatsoever).”
The Associated Press contributed to this report.
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