Sweepstakes winnings are taxed as ordinary income by the IRS, meaning that the amount you win is added to your total income for the year. How are sweepstakes winnings taxed? The tax rate depends on your overall income level, and you may also be subject to state taxes. It's important to keep records of your winnings and any related expenses, as you may be able to deduct certain costs. Always consult a tax professional to ensure compliance and to understand how are sweepstakes winnings taxed in your specific situation.