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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
medical expenses are those you can deduct on iii. The name and address of the or- Sale of home. You may be able to exclude
Schedule A (Form 1040). For more information ganization to receive the prize or from income all or part of any gain from the sale
about Archer MSAs or Medicare Advantage award; or exchange of your main home. See Pub. 523.
MSAs, see Pub. 969.
iv. Your name, address, and TIN; Sale of personal items. If you sold an item
Moving expense reimbursements. For tax and you owned for personal use, such as a car, re-
years beginning after 2017, reimbursements for v. Your signature and the date frigerator, furniture, stereo, jewelry, or silver-
certain moving expenses are no longer exclu- signed. ware, your gain is taxable as a capital gain. Re-
ded from the gross income of nonmilitary tax- port it as explained in the Instructions for
payers. See Pub. 521 for more information. c. In the case of an unexpected presen- Schedule D (Form 1040). You can't deduct a
tation, you must return the prize or loss.
Prizes and awards. If you win a prize in a award before using it (or spending, However, if you sold an item you held for in-
lucky number drawing, television or radio quiz depositing, or investing it, etc., in the vestment, such as gold or silver bullion, coins,
program, beauty contest, or other event, you case of money) and then prepare the or gems, any gain is taxable as a capital gain
must include it in your income. For example, if statement as described in (b) above. and any loss is deductible as a capital loss.
you win a $50 prize in a photography contest, d. After the transfer, you should receive
you must report this income on Schedule 1 from the payer a written response Example 39. You sold a painting on an on-
(Form 1040), line 8i. If you refuse to accept a stating when and to whom the desig- line auction website for $100. You bought the
prize, don't include its value in your income. nated amounts were transferred. painting for $20 at a garage sale years ago. Re-
Prizes and awards in goods or services port your $80 gain as a capital gain as ex-
must be included in your income at their FMV. These rules don't apply to scholarship or fel- plained in the Instructions for Schedule D (Form
lowship awards. See Scholarships and fellow- 1040).
Employee awards or bonuses. Cash ships, later.
awards or bonuses given to you by your em- Scholarships and fellowships. A candidate
ployer for good work or suggestions must gen- Qualified opportunity fund (QOF). Effective for a degree can exclude amounts received as
erally be included in your income as wages. December 22, 2017, section 1400Z-2 provides a qualified scholarship or fellowship. A qualified
However, certain noncash employee achieve- a temporary deferral of inclusion in gross in- scholarship or fellowship is any amount you re-
ment awards can be excluded from income. come for eligible gains invested in QOFs, and a ceive that is for:
See Bonuses and awards under Miscellaneous stepped-up basis to fair market value of the in- • Tuition and fees required to enroll at or at-
Compensation, earlier. vestment in the QOF at time of sale or ex- tend an eligible educational institution; or
change, if the investment is held for at least 10 • Course-related expenses, such as fees,
Prize points. If you're a salesperson and years. See the Form 8949 instructions on how books, and equipment that are required for
receive prize points redeemable for merchan- to report your election to defer eligible gains in- courses at the eligible educational institu-
dise that are awarded by a distributor or manu- vested in a QOF. See Form 8997, Initial and tion. These items must be required of all
facturer to employees of dealers, you must in- Annual Statement of Qualified Opportunity students in your course of instruction.
clude their FMV in your income. The prize Fund (QOF) Investments, and its instructions
points are taxable in the year they're paid or for reporting information. For additional informa- Amounts used for room and board don't qualify
made available to you, rather than in the year tion, see Opportunity Zones Frequently Asked for the exclusion. See Pub. 970 for more infor-
you redeem them for merchandise. Questions, available at IRS.gov/Newsroom/ mation on qualified scholarships and fellowship
grants.
Pulitzer, Nobel, and similar prizes. If you Opportunity-Zones-Frequently-Asked-
were awarded a prize in recognition of accom- Questions. Payment for services. Generally, you
plishments in religious, charitable, scientific, ar- can't exclude from your gross income the part
tistic, educational, literary, or civic fields, you Qualified tuition program (QTP). A QTP of any scholarship or fellowship that represents
must generally include the value of the prize in (also known as a 529 program) is a program set payment for teaching, research, or other serv-
your income. However, you don't include this up to allow you to either prepay or contribute to ices required as a condition for receiving the
prize in your income if you meet all of the follow- an account established for paying a student's scholarship. This applies even if all candidates
ing requirements. qualified higher education expenses at an eligi- for a degree must perform the services to re-
ble educational institution. A program can be
ceive the degree.
1. You were selected without any action on established and maintained by a state, an
your part to enter the contest or proceed- agency or instrumentality of a state, or an eligi- Exceptions. You don't have to include in
ing. ble educational institution. income the part of any scholarship or fellowship
2. You aren't required to perform substantial The part of a distribution representing the that represents payment for teaching, research,
or other services if you receive the amount un-
future services as a condition for receiving amount paid or contributed to a QTP isn't inclu- der:
the prize or award. ded in income. This is a return of the investment • The National Health Services Corps Schol-
in the program.
3. The prize or award is transferred by the In most cases, the beneficiary doesn't in- arship Program,
payer directly to a governmental unit or clude in income any earnings distributed from a • The Armed Forces Health Professions
tax-exempt charitable organization as des- QTP if the total distribution is less than or equal Scholarship and Financial Assistance Pro-
ignated by you. The following conditions to adjusted qualified higher education expen- gram, or
apply to the transfer. ses. See Pub. 970 for more information. • A comprehensive student work-learn-
a. You can't use the prize or award be- ing-service program (as defined in section
fore it's transferred. Railroad retirement annuities. The following 448(e) of the Higher Education Act of
b. You should provide the designation types of payments are treated as pension or an- 1965) operated by a work college (as de-
nuity income and are taxable under the rules
fined in that section).
before the prize or award is presented explained in Pub. 575.
to prevent a disqualifying use. The • Tier 1 railroad retirement benefits that are For information about the rules that apply to
designation should contain: more than the social security equivalent a tax-free qualified tuition reduction provided to
employees and their families by an educational
i. The purpose of the designation benefit. institution, see Pub. 970.
by making a reference to section • Tier 2 benefits.
74(b)(3); • Vested dual benefits. VA payments. Allowances paid by the VA
ii. A description of the prize or Rewards. If you receive a reward for providing for education, training, or subsistence under
any law administered by the Department of Vet-
award; information, include it in your income. erans Affairs, aren't included in your income.

Page 36 Publication 525 (2022)