My wife received a $10,000 Excellence in Teaching award in 2016 from a non-profit organization. Can this be considered a gift, which is non-taxable?

[jsarra]

The income was received on a Form 1099-MISC. It was based on merit and not worked performed.

[DawnC0]

Unfortunately, unsolicited merit awards or prizes are fully taxable.  The IRS gets a copy of form 1099-MISC and does expect it to be reported.  It is taxed at ordinary income rates, not at self-employment rates.  Enter in TurboTax as:

• Federal Taxes >>
• Wages & Income >>
• Other Common Income >>
• Form 1099-MISC >>
• Use Description 'Merit Award' and choose Prize winnings. 

The amount will go to line 21, other income.  

You can avoid having to pay income tax on an award if you itemize deductions and give the money away and deduct the amount as a charitable contribution. For example, if you get a $10,000 award and donate the entire amount to charity, you'll be able to take a $10,000 charitable donation deduction on your taxes for the year, which will offset the amount of the award. However, if the award is extremely large, you may have to deduct it over several years because the annual deduction for a charitable contribution is limited to 50% of your adjusted gross income.