Oscars Nominees to Be Hit with Up to $63,000 Tax Bill for What Was in ‘Free’ Gift Bags

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Who gets to pay when you get a gift? All of those Hollywood A-listers who accepted gift bags at the Oscars or any other awards show.

Over at Forbes, contributor Robert Wood looked at the cost of the freebies and estimated that the gift bags handed out this year totaled $126,000 in value each. For the record, that’s down from the $137,000 per bag estimated last year by CNBC.

The Internal Revenue Service has long decided these gifts were not really like presents from grandpa and grandma under the Christmas tree.

“If you think about it as ‘what is the intent of providing those items, products or services?’, obviously it’s the hope that the celebrity is going to use that product, go on that vacation. They’re trying to influence behavior,” said Eric Bronnenkant, head of tax at Betterment.

The IRS alerted the entertainment industry in 2006 to the practice of taxing so-called gifts years ago, writing, “In general, the person 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.”

Wood did the math. Ouch.

“At the 37 percent IRS tax rate, that’s $46,620. California-based stars will have to pay California’s up to 13.3 percent tax too, another $16k or so. That’s up to $63,378 in state and federal taxes,” he wrote.

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