Usually yes—running a raffle does not by itself jeopardize your 501(c)(3) or church tax-exempt status. But a raffle is legally a form of charitable gaming (gambling), and that opens up rules at two levels you must handle before selling a single ticket.
State law comes first. Raffles are regulated almost entirely by state (and sometimes local) law, and the rules vary widely. Many states require you to register or obtain a gaming/raffle license, cap prize values, restrict who may sell tickets, and demand post-event prize reporting. A few states prohibit charitable raffles outright. Check your state's charitable-gaming office or attorney general before you start.
Federal tax angle. Raffle proceeds are generally unrelated business income, because running games of chance isn't related to your charitable mission. The good news: a key exception protects most small charities—if substantially all the work is done by unpaid volunteers, the income is typically excluded from unrelated business income tax (UBIT). You may still need to report gaming activity (Schedule G) if you file a full Form 990.
Big prizes trigger IRS obligations. You must issue the winner Form W-2G when the prize (minus the ticket cost) is $600 or more AND at least 300 times the wager—both conditions have to be met. If net winnings exceed $5,000, you generally must withhold federal tax (currently 24%, or a higher grossed-up rate if you cover the tax for the winner) and remit it. Confirm current rates and thresholds with a CPA or attorney.
General information, not legal or tax advice—confirm specifics with a CPA or attorney.
What to do next
- Look up your state's charitable-gaming/raffle rules (usually the state attorney general, gaming commission, or secretary of state) and register or license before selling tickets.
- Keep your raffle run by volunteers to preserve the UBIT exclusion, and track ticket sales and prize values carefully.
- For any prize that meets both W-2G triggers (over $600 net and at least 300x the wager), collect the winner's name, address, and Social Security number so you can issue Form W-2G; plan to withhold and remit tax on net winnings over $5,000.
- Read IRS Publication 3079 and confirm your reporting and withholding plan with a CPA or attorney experienced in nonprofit gaming.
A quick note
This is general information for nonprofits, not legal, tax, or accounting advice. Rules and figures change and vary by state — verify with a qualified professional before you act.
Sources & tools
Free, primary sources
- IRS — Publication 3079, Tax-Exempt Organizations and Gaming — IRS guide covering raffles, licensing, recordkeeping, W-2G prize reporting, and withholding for exempt-organization gaming.
- IRS — Exempt Organization Gaming and Unrelated Business Taxable Income — Explains when gaming/raffle income is UBTI and the volunteer-labor and other exceptions.
- National Council of Nonprofits — Games of Chance, Raffles, and Charity Auctions — Plain-language overview noting raffles are regulated by state law and pointing to state-by-state compliance considerations.
- IRS — Form W-2G and Instructions (Certain Gambling Winnings) — Official thresholds and rules for reporting raffle/gambling prizes and federal withholding.
Last verified 2026-06-17. Rules and figures change — verify at the source before you act.
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