Thinking about hosting a raffle, bingo night, or casino fundraiser? These events can be great for engaging supporters and raising money. But the reporting rules are more involved than most organizations expect, and getting them wrong can mean penalties, compliance headaches, or awkward moments with your donors.
Before you start planning, it helps to understand what you’re actually running. A raffle and a sweepstakes might look similar on the surface, since both pick winners at random, but the legal distinction matters.
In a raffle, participants pay to enter. That payment element is what makes it a form of gambling in the eyes of the law, which is why raffles are heavily regulated and require permits in most states.
A sweepstakes, by contrast, requires no purchase or payment to enter. That “free entry” feature keeps it out of gambling territory, but it comes with its own rules, most notably the requirement to offer a way to participate without buying anything. If your event charges for entry with no free alternative, you’re running a raffle, not a sweepstakes, and the compliance obligations that follow can be significant.
Before you sell a single raffle ticket, check whether your state requires registration. Skipping this step can lead to fines or even nullification of the raffle itself.
And on the deduction front, purchases of raffle tickets are not tax-deductible. Buyers are purchasing a chance to win, not making a charitable gift. Communicating that up front, even in the fine print, can save confusion and frustration down the road.
On the IRS side, note that the reporting obligations can add up quickly. Currently, if your gaming activities bring in more than $15,000 in gross receipts, you’ll need to complete Schedule G on your Form 990. For individual prizes, you’re generally required to file a W-2G when the winnings (minus the cost of the ticket) hit $2,000 or more and the payout is at least 300 times the wager. If net winnings exceed $5,000, you must withhold federal income tax at 24%. For non-cash prizes, the winner may need to pay you the withholding amount before they can collect their haul. Make sure to check the current thresholds when you plan your event.
And, if your raffle is part of a bigger function, like a gala, keep the numbers separate. The IRS expects raffle revenue and expenses to be reported independently from the rest of the event.
If the above wasn’t enough, also keep in mind that frequent gaming activities could trigger unrelated business income tax. The good news is there’s an exception when the work is done primarily by volunteers, which is how most nonprofits run these events anyway. A little compliance planning on the front end keeps the focus where it belongs: on your mission.
