Prize money tax: how esports players, athletes, artists and contest winners can legally pay 0% US tax

What Epic Games, Devpost, the World Series of Poker and US chess opens withhold from esports players, athletes, artists and contest winners outside the US, how treaty thresholds and days in the United States change the rate and how overwithheld tax comes back, in 2026.

Epic Games, Devpost hackathons, the World Series of Poker and chess opens in the United States pay prize money to winners from many countries. Each of them asks winners from abroad for a US tax form. The US answers on withholding for foreign artists and athletes start from a general rule: "The tax code requires withholding on most types of gross income of nonresident aliens at the rate of 30 percent." On a $50,000 prize, the tax is $15,000.

Which prizes count as US income

The US guide for nonresidents ties prizes to the payer: "Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds." It adds: "These rules do not apply to amounts paid as salary or other compensation for services." Murblz experts have described payouts to creators in the guide to Instagram tax and ad revenue in the guide to AdSense tax.

Among the examples of FDAP income in the US guide for withholding agents is this line: "Purses paid to nonresident alien boxers for prize fights in the United States." The next line reads: "Prizes awarded to nonresident alien professional golfers in golfing tournaments in the United States."

Esports tournaments

Epic Games' help center for Fortnite competitive payouts says that Epic withholds 30% from prizes paid to players outside the United States. The US guide for withholding agents covers prizes won in a competition: "Prizes and awards are amounts received primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, or are received as the result of entering a contest."

Challengermode's help center says that non-US individuals, including individual players and content creators, complete Form W-8BEN. For an esports team that receives prize money on behalf of its players, the same help center names Form W-8BEN-E. The instructions for Form W-8BEN read: "A foreign person includes a nonresident alien individual and certain foreign entities that are not U.S. persons (entities that are beneficial owners should complete Form W-8BEN-E rather than this Form W-8BEN)."

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Hackathons and online contests

The US guide for withholding agents reads: "A prize or award is taxable to the recipient unless all of the following conditions are met." The first condition reads: "The recipient was selected without any action on their part to enter the contest or proceeding." The last one reads: "The prize or award is transferred by the payer to a governmental unit or tax-exempt charitable organization as designated by the recipient."

Devpost's help center says that hackathon winners enter their country of residence for tax purposes, and that this country decides which tax form they are asked to fill out. In the official rules of Kiroween 2026, a hackathon run on Devpost, residents of countries other than the United States may be asked for Form W-8BEN, and the sponsor or Devpost may withhold part of the prize to comply with US tax law.

The model tax treaty of the United States has an article for income that no other article covers: "Items of income beneficially owned by a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that Contracting State."

Chess opens

The 2024 SPICE Cup Open, a chess tournament listed by US Chess, asked prize winners who were nonresident aliens to complete Form W-8BEN and withheld 30% of their prizes. Players from treaty countries with a US Social Security or tax ID number could avoid this withholding by submitting Form 8233, the tournament page says. The instructions for Form 8233 read: "Complete and give Form 8233 to your withholding agent if some or all of your compensation is exempt from withholding." They also warn: "You must know the terms of the tax treaty between the United States and the treaty country to properly complete Form 8233."

Athletes at US events

The US guide for withholding agents explains why athletes have a category of their own: "Because many tax treaties contain a provision for pay to artists and athletes, a separate category is assigned these payments for chapter 3 withholding purposes." It continues: "This category includes payments made for performances by public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes."

The US page on foreign artists and athletes sets the default: "Unless you as the withholding agent are prepared to deal with all the complex tax issues raised above, you must withhold tax at the statutory rates (30% for independent personal services, graduated rates for dependent personal services, or 30% in cases in which you cannot determine the status of the payee) on all payments made to foreign artists or athletes."

The US answers on withholding for artists and athletes describe events with more than one promoter: "This means that for any given event there could be several withholding agents who have a potential liability for withholding tax on any payments made to, or for the benefit of, a nonresident alien artist or athlete."

Athletes and artists who perform in the United States can ask for a central withholding agreement for reduced withholding. The US guide for nonresidents reads: "Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability." The US answers add: "A CWA is only available for a nonresident alien artist or athlete who is a natural person." For boxers, they read: "Training expenses a fighter incurs in preparation for a specific bout being held in the United States are allowed as deductible expenses in estimating tax liability for the purposes of a CWA if it is determined that these expenses are associated with the income earned in the U.S."

Musicians and other artists

The US page on foreign artists and athletes names one case with less withholding: "An exception may exist in cases in which only one individual artist or athlete is involved, the activities are clearly identifiable as independent personal services, and a tax treaty exemption clearly applies." For a group of performers, the same page reads: "Each of the nonresident alien individuals in the group is a beneficial owner of the income and may claim a tax treaty benefit on either Form W-8BEN or Form 8233." Murblz experts have described how the form works for investors in the guide to Form W-8BEN.

Painters and other artists who win a prize for pictures shown at a US exhibition fall under the same list of FDAP income in the US guide for withholding agents: "Prizes awarded to nonresident alien artists for pictures exhibited in the United States."

Poker and casino games

The World Series of Poker answers for 2024 say that international players may need to complete Form W-8BEN for residency purposes. The US guide for withholding agents reads: "In general, nonresident aliens are subject to chapter 3 withholding at 30% on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U.S. trade or business and is not exempted by treaty." Under the WSOP answers, players from treaty countries must provide an ITIN, and those who do not, as well as players from other countries, are subject to 30% withholding. On $40,000 won in a poker tournament, that is $12,000.

The US guide for withholding agents names games with no tax: "No tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States." The US guide for nonresidents covers players who gamble as a business: "Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U.S. trade or business." It adds: "This income is exempt under some tax treaties."

Days in the United States

Murblz experts have described the day count for US residence in the guide to Upwork tax. The US guide for nonresidents has a rule for charity events: "A professional athlete who is temporarily in the United States to compete in a charitable sports event is an exempt individual." It limits the days: "In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in a sports event." It also reads: "You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events."

What decides the rate

The US guide for withholding agents describes treaty thresholds for performers: "Under many tax treaties, compensation paid to public entertainers or athletes for services performed in the United States is exempt from U.S. income tax if the artist or athlete derives receipts for the tax year concerned, including expenses reimbursed to them or borne on their behalf, not in excess of $10,000, or in more recent treaties, $20,000."

The model tax treaty of the United States sets a higher figure and says that income of a performer from the other country "may be taxed in that other Contracting State, except where the amount of the gross receipts derived by such entertainer or sportsman, including expenses reimbursed to him or borne on his behalf, from such activities does not exceed thirty thousand United States dollars".

The instructions for Form 8233 tie treaty benefits for services to residence: "If you are claiming a benefit under either the income from employment/dependent personal services article or the income from independent services/business profits article of the treaty, you must be a resident of the treaty country." Murblz experts check tax residence with the tax residency calculator and have described a change of residence in the guide on how to become tax resident abroad.

Where winners lose money

The US answers on withholding for artists and athletes describe what happens above the threshold: "For withholding tax purposes, the amount that is exempt due to a treaty provision for artists and athletes most often has a threshold amount and once the threshold is reached, all U.S. personal sourced income is subject to U.S. withholding and tax." Under a $20,000 threshold, $25,000 earned at US tournaments in a year is taxed in full, which at 30% is $7,500.

A tour with no profit still brings a US return, and the same answers read: "A nonresident alien artist or athlete must file a U.S. tax return (Form 1040-NR) for any tax year the performer was engaged in trade or business in the U.S or has other income subject to taxation regardless as to profit or loss." They add: "This is true even if no tax is due, withholding has already fully paid all taxes, or the performer claims tax treaty benefits (Treas. Reg. section 1.6012-1(b))."

Getting back what was withheld

Players at the SPICE Cup Open whose prize was withheld received a 1042 form the following year, no later than March, according to the tournament page. The page says that they could use it to file a US return, claim expenses and try to recover some or all of the withheld tax.

The US answers on withholding for artists and athletes cover a tour that starts before a CWA is approved: "The withholding agent, as determined by the tax code, is responsible for withholding at 30%." They continue: "The individual artist or athlete will be able to apply for a refund of any excess withholding when he files his Form 1040-NR at the end of the tax year."

Murblz experts have described refund deadlines in the guide to US tax on YouTube, KDP and app store income and refund claims for rights holders in the guide to royalty tax.

0% is possible, but not for everyone

Contest prizes from organizers outside the United States are not US income. For awards, the US guide for nonresidents reads: "Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U.S. source income."

Pay for performances at US events stays US income above the treaty threshold, and the instructions for Form 8233 read: "In most cases, athletes and entertainers are not exempt from tax on income derived from their activities." For winners who become US residents, the US guide for nonresidents reads: "Resident aliens are generally taxed in the same way as U.S. citizens. This means that their worldwide income is subject to U.S. tax and must be reported on their U.S. tax return."

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