A provision tucked inside the One Big Beautiful Bill Act, enacted on July 4, 2025, included a change to the threshold for filing a 1099-MISC form from $600 to $2,000. Anyone who promotes goods or services through prize promotions in the U.S. should take note of this change. 

Prizes awarded in a promotional contest or sweepstakes are subject to personal income tax in the U.S. It is always the responsibility of the individual winner to pay tax on the fair market value of any prize awarded in such a promotion. Starting in tax year 2026, the sponsor of a promotion such as a contest or sweepstakes will be required to file a 1099-MISC form for any recipient of a prize with a fair market value of more than $2,000, whereas through the current tax year the threshold remains at $600. Furthermore, for 2027 and subsequent years, the threshold for the 1099-MISC form will be adjusted for inflation.

This change can have significant implications not only for companies that sponsor sweepstakes and contests, but also for promotion agencies that design and administer such prize promotions. Many sponsors and administrators structure promotions with an eye toward two important prize thresholds. The first is the $5,000 threshold for the entire prize pool, which relates to Florida’s and New York’s bonding and registration requirements for sweepstakes. The second is the threshold for filing a 1099-MISC form for winners. In order to reduce the administrative burden of fulfilling prizes, sponsors and their agencies tend to keep individual prize values at or below the tax reporting threshold. That translates into prize pools with more prizes with approximate retail values (ARVs) of under $600. A higher 1099-MISC threshold will give sponsors and administrators greater flexibility to award more valuable prizes (under $2,000) without the burden of obtaining tax IDs from winners and reporting the prizes to the IRS. However, they will still need to contend with the $5,000 total prize value threshold if their promotions are open to residents of Florida or New York.

Some sponsors and administrators use the 1099-MISC threshold as a bright-line marker for determining when it is necessary to obtain declarations of eligibility, liability waivers, and publicity releases. They tend to rely on their official rules alone for winners of prizes valued at under $600 rather than seeking express, signed documentation confirming eligibility and releasing the sponsor and related parties from potential liability arising from receipt or use of the prize. Sponsors and administrators may want to reconsider whether the new threshold of $2,000 (and more in subsequent years) is generally a reasonable bright line for requiring winner declarations, waivers, or releases.

Regardless of whether a sponsor or administrator requires additional documentation even for prizes that have four-figure ARVs, this change to the 1099-MISC form threshold will likely be welcome news for the promotion marketing industry because it gives promoters more flexibility as to the value of prizes offered without needing to report the winnings to the IRS.