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Wedding Taxes: Four Must-Know Tax Facts For Planning Your Big Day

With a booming wedding industry, I sometimes wonder how it’s even possible that our country is in a recession at all. Now that the average cost of a wedding hovers around $29,000, you’d think that the spending induced by weddings could single-handedly pull our country out of its economic troubles (then love really could conquer all).

But weddings aren’t just good revenue-makers for vendors, they also have more tax implications than people realize when they’re planning their big day. Here are four instances where taxes may affect your wedding—for better or for worse.

Wedding “Prizes”

With prizes ranging from a free tuxedo rental, to free photographer services, to even an entirely free wedding, brides near and far know that wedding giveaways are abundant and will do just about anything to get something free or discounted for their expensive day.

But are these prizes really free?

Not if Uncle Sam has anything to say about it: Anytime you win a prize, you have to pay taxes on that prize. The IRS considers any prize to be “other income” for you and require that you report it on your tax return (you’ll likely receive a 1099 form for large prizes). Winners won’t have to worry much if their prizes are small. However, those that win prizes worth $10,000, $50,000, or even $100,000 may need to re-consider the amount of taxes they’ll have to pay on said prize before they claim their winnings. Taxes on a $100,000 prize could easily be more than you had initially planned to spend on a wedding in the first place!! Turns out, there really is no such thing as free.

Sales Tax: The Wedding Budget Buster

When you’re making the first draft of your wedding budget, it’ll probably include all the must-have items like a cake, attire, reception hall rental fees, disc jockey fees, catering costs, costs of the bar, and flowers. Not too many brides and grooms forget those things.

Guess what? Most of the items in your wedding budget are subject to sales tax (there are some exceptions, for example, some services or building rentals aren’t taxed).

Sales tax on a $6,000 caterer bill could easily reach or exceed $500. If you start spreading a sales tax percentage across your entire wedding budget, your total tax bill could reach a couple thousand dollars or more. Taxes can end up being a significant amount, so don’t forget to include an estimate in your wedding budget.

Consider Charitable Contributions

If you’re having your ceremony at a religious site, it might be worth investigating whether your ceremony fees could qualify for charitable contributions.

Alternatively, if you are a member of the church where you will get married, talk with the church administrator to see if there is a donation minimum for members so that you won’t have to pay a ceremony fee. If you just have to increase your donations by a couple hundred dollars in order to avoid the ceremony fee, it might be worth it considering you’ll be able to use your contributions as a tax write-off and contribute to a good cause all in one fell swoop.

Are you using the hall or banquet room at your church for your reception? The rental fee could be a write-off. Likewise, if your church needs to purchase additional equipment (tables, chairs, etc.) to host your event, consider purchasing the equipment for them as a donation and using the expense as a tax write-off.

Will Mom and Dad Be Taxed?

Age-old tradition says that the bride’s parents pay for the wedding and reception, and the groom’s parents pay for the rehearsal dinner. In this day and age, those rules are bending a bit, but many parents still fork over quite a bit of money to help pay for some of the wedding, if not all of it.

So, will your generous parents be taxed on their gift? Or, is the money even considered a gift?

It really depends on whether your parents give you the money straight-up to pay for the wedding or if they pay for the wedding out of their own pockets:

  • If you parents pay for the wedding right out of their pockets, various arguments say that they won’t be taxed since this isn’t technically a gift and it can’t be easily traceable to one person.
  • If your parents write a check to you for a lump sum to pay for the wedding, this is most definitely a gift.

Luckily, the thresholds for gift taxes are fairly high, so it’s unlikely that your parents will be taxed on the wedding money that they have gifted you. Since they can split the gift between themselves as givers as well as split the gift between you and your future spouse as receivers, they can give a pretty significant amount before they’ll be hit with the gift tax. So, unless you’re having an ultra-extravagant, celebrity-like wedding, chances are that your parents probably won’t be taxed on the money they give you for your big day.

The Bottom Line: Don’t Forget Uncle Sam

When you’re planning for your wedding, it’s important to be conscientious of how taxes might impact your decisions. Don’t let the tax-side of weddings ruin your big day, just be wary of it in the planning stages.

Have you ever won a big wedding giveaway? What was your experience with the prize and paying taxes on the prize?

About Amber Gilstrap

Amber is a twenty-something CPA from Kansas City, Missouri who loves writing, working out, and---of course---finding fresh ideas for saving money. Follow her on twitter @ambergilstrap.

Comments

  1. Not only do you have to account for sales tax, a lot of places have a “service charge” of 10-15%! Our rehearsal dinner location and our reception venue both had these stupid fees, which can make your real cost WAY higher than you anticipated

  2. I like the bottom line of this article. Nothing is free.

  3. David Weliver says:

    The issue of taxes on prizes has always vexed me. Obviously if you win cash, you simply have to give some of it to Uncle Sam right off.

    But if you’re broke and win a $40,000 sports car, how do you come up with the $10,000 or so of taxes to pay on that $40,000 of “income”? Not a fun dilemma to be in, I’m sure!

    • Simple. You sell the car to pay the tax (and in some states, pay even more tax on that sale). It isn’t optimal, but I’d take it over nothing.

  4. I am getting married on May 7th, 2011 and this article made me realize that nothing is free. But honestly how many people will claim ‘winnings’ on their tax forms? I understand winning of over $10k, since anything over $10k is watched, thanks to the patriot act, but anything smaller and I highly doubt anyone would claim it.

  5. This article could be more helpful if you included actual numbers. For example, you make a good point that if parents give a check to the happy couple, they could be taxed “if you’re having an ultra extravagant celebrity-style wedding.” FALSE! The gift tax threshold in 2011 was $13k. Since $13k from each set of parents would total less than what you say is the average wedding cost, you’re not making a lot of sense. Please beef up your posts with information that can actually help people make wiser decisions.

    • Hi SWA, the threshold is $13k for 2011, but it can change from year to year. That’s why I left it out, but I’ll try to include relevant links and/or dates for tax rules in the future.

    • SWA,,

      Since you are insisting on accurate numbers, I should point out that the $13,000 annual exclusion from gift tax is per donor to each donee. Meaning each set of parents (set implies 2) could give $26,000 to the bride and another $26,000 to the groom) without facing gift tax.*** A total of $104,000 could be given before any gift tax consequences.

      ***Federal Gift tax. Your state may or may not have its own different gift tax.