Are Those High-Value Gift Bags Given to Celebrities at Awards Shows Really Tax-Free?

If you tune in to watch the Golden Globes, the Oscars, and the endless lineup of other awards shows, you've no doubt noticed the goodie bags that celebrities are given for serving as presenters, or sometimes just for making an appearance. Most of us think of goodie bags as the little trinkets kids get at birthday parties. Not so with the awards show gift or goodie bags. They may contain such items as tickets for luxury trips, expensive jewelry or electronics, and other high-dollar "trinkets," valued altogether at up to $100,000.

Dozens of these awards shows are held each year... after all, nobody loves to congratulate and admire themselves like Hollywood does. Besides Hollywood entertainment, what other occupation can you name that creates more of itself... that is... more entertainment, by holding a show designed to let actors high-five each other, and then televise it?

You may wonder when you watch these awards shows if those lucrative goodie bags represent taxable income to the wealthy celebrities. Until recently, the celebrities thought it did not. Just imagine... by participating in a few awards show a year, celebrities not only get additional publicity, an open mic in which to shove their politics down your throat, and hundreds of thousands of freebies a year.

But the days of paying no income tax on those goodies are gone. In early January 2007 the IRS announced that they had reached a satisfactory agreement with the Hollywood Foreign Press Association or HFPA regarding the taxability. The Internal Revenue Service noted that, in reaching the agreement, the HFPA was quite cooperative.

In the past, most celebrities have not included those goodie bags in their taxable income, mistakenly believing that they didn't have to. You may be wondering why something considered a gift would be taxable, since we give gifts throughout the year without the question of taxability.

Here's the difference: