If you’ve just won a competition, congratulations!
You may have also received prize money for your participation and achievement. Now, you may be wondering: Do I have to pay tax on this money? To answer that, yes, such monetary awards are indeed taxable. So, then you may wonder: How much tax do I pay? Well, the amount is taxed like other employment income at the graduated tax rates (refer to the “Graduated Tax Brackets” tax tip for details on the rates).
Which amount do I report and where do I report it?
The full amount (aka the “gross amount”) of the monetary award needs to be reported on the tax return. To put it shortly, if you receive a T4 slip for the award, the amount is reported under Employment Income (Line 10100); and if you don’t receive a T4 slip, then the award amount is reported under your Other Income (Line 13000).
How do I know I will receive a T4 for the amount?
If you win a competition at the University of Waterloo (UWaterloo) and receive prize money, this money will be paid to you via the Workday payroll system. The competition coordinators will reach out to you with instructions for setting up a Workday account. Since it will be paid via Workday, you will receive a T4 slip in February pertaining to that amount and the amount will be reported under Employment Income.
What if the competition was not at the University of Waterloo?
If it is an external competition, you should reach out to the competition organizers to confirm if you will receive a T4 slip for the money. If you will receive a T4 slip, report the amount under Employment Income on your tax return. If not, report it under Other Income.
In summary:
- Prize money is taxable at the graduated tax rates, just like all personal income.
- To report it, check with the competition organizers to learn if you will be receiving a T4 slip
- If you receive a T4 slip
- Report the prize money amount from the T4 slip under Employment income (Line 10100)
- If you do not receive a T4 slip
- Report the prize money amount under Other Income (Line 13000)
- Fatima, Young Tax Professional