Confession: I regularly enter sweepstakes featuring travel-related prizes.
Sure, the odds of winning are miniscule, which probably explains why I’ve never won anything. Nevertheless, I find the lure of travel sweepstakes irresistible. And entering is generally simple and quick.
Most recently, I entered Marriott’s “Millionaire” sweepstakes, so-called because the grand prize is a jaw-dropping one million Marriott Rewards points, plus one million frequent flyer miles, plus a $25,000 Marriott Gift Card. Other prizes include one million Marriott points (one winner), 100,000 Marriott points (10 winners), 50,000 Marriott points (five winners), and so on.
That makes this one of the most lucrative sweepstakes I’ve ever encountered.
Of course, sweepstakes are marketing initiatives designed to identify prospective customers for the companies which sponsor them, and begin conversations which will ultimately lead to sales. However, ethical companies routinely allow sweepstakes participants to opt not to receive future sales messages. And highly ethical companies make follow-up sales correspondence “opt in”—i.e. the customer will receive no future messages unless he indicates his choice to do so.
With online sweepstakes, look for a check box or radio button at the bottom of the entry form, which permits the consumer to either opt in or out.
If you do win, be prepared for the tax consequences. As far as the IRS is concerned, the value of the prize must be added to the winner’s other income and will be taxed accordingly. Which, in the case of frequent flyer sweepstakes, raises the question: How much are airline miles and hotel points worth?
The answer will be found in the sweepstakes’ fine print. In the case of the Marriott sweepstakes, the one million Marriott Rewards points are assigned an ARV (Approximate Retail Value) of $9,000. The ARV of the airline miles is $17,050. And the $25,000 Marriott Gift Card is assigned its face value, $25,000. So the taxable total would be $51,050.
Bottom line: For those whose marginal tax rate is 25%, the prize would result in additional federal taxes of $12,763. That’s a big hit, to be sure. But compare it to the value of the airline miles alone. One million miles are redeemable for 40 restricted round-trip domestic coach tickets. If those tickets were worth $300 each, on average, the value of the miles would be $12,000. That’s offset by the tax liability, but the hotel points and gift card would be gravy.
In dollars and cents terms, this is a sweepstakes well worth entering (the deadline is September 30). I recommend doing so, but with some admittedly self-interested reservations, since you’d be reducing my own chances of winning.