When Oscar night arrives later this month, winners will take home bragging rights and the famous gold-plated statuette. For 21 of the nominees who don’t win, their consolation prize is a gift bag worth over six figures — along with an accompanying tax bill.

In recent years, the IRS has launched an outreach campaign to the entertainment industry about the taxability of gift bags and promotional items. That’s right: In the eyes of the IRS, so-called gift bags aren’t actually gifts because they’re given with the expectation of publicity or other benefits.

Celebs who take home lavish gift bags and freebies from appearing at awards shows and other gatherings are subject to taxes on the value of the items they receive. Similarly, the Super Bowl MVP who receives a vehicle each year also owes taxes on that vehicle (a precedent that goes back to the 1960s, when NFL Hall of Famer Paul Hornung argued unsuccessfully that his Corvette should not be taxable). Winning money or goods on a TV game show would also generate taxable income.

“One might think that it’s a gift out of generosity from all these [brands] providing these goodies in these gift bags, so I’m sure a number of recipients are very surprised when they get a 1099 in the mail,” says Robert Charron, partner-in-charge of the tax department of accounting firm Friedman LLP.

“For any gift [from a business] that’s valued at $600 or more, you’re supposed to get a 1099-MISC,” says Len Hayduchok, president of advisory firm Dedicated Financial Services. “If you have a gift that’s valued at $100,000 and you’re in a 33 percent tax bracket, that’s costing you $33,000. If it’s worth $33,000 to you, then you’d keep it.”

Last year’s Oscar gift bag was the most valuable collection of items yet, with the contents valued at over $168,000, according to Vanity Fair and other media outlets. Stars received swag including a $20,000 astrology reading, $25,000 worth of custom furniture and a nine-night Italian vacation package valued at $11,500.

However, these gift bags and promotional items don’t generate self-employment tax, according to Tim Speiss, partner-in-charge of accounting firm EisnerAmper’s Personal Wealth Advisors Group. Self-employment tax is the portion of Social Security and Medicare deductions normally covered by the employer (12.4 and 2.9 percent, respectively) that self-employed people must pay themselves in addition to regular income taxes.

Let’s assume that you’re a nominee and you’d rather not pay income taxes on items you don’t plan to use. “One thing that a person can do is refuse to accept it and therefore not be faced with paying taxes on some of the bizarre things that are in the bag,” Charron says. “There’s things in there that people may have very little interest in.”

Rather than refusing the bag, you could donate it to charity. George Clooney reportedly donated his 2006 Oscar gift bag to the United Way, and it sold at auction for $45,100. “Presuming that the charity is a proper exempt organization, they can get a tax deduction, and the deduction would be eligible against the value of the property received,” Speiss says. “Generally speaking, it’s a dollar-for-dollar write-off.”

However, the donation strategy isn’t foolproof either, because you’re generally limited to deducting donations of up to 50 percent of your adjusted gross income. And if you need to hire a professional appraiser to assess the value of the items, that cost is not tax-deductible.

Rather than accepting the bag and having it appraised, Charron says you could plan a donation to your chosen charity in advance. “If the person signs a proscribed form and assigns it to a recognized charity before they actually receive a bag, that will work to provide no negative tax consequences,” he says.

It gets messier when you want some — but not all — items from the bag. In that case, you might keep some items and sell or donate others. “If the net price you get from [selling] them is higher than your tax hit, then you’re ahead of the game,” Hayduchok says. “If you’re a celebrity and you get some stuff you don’t want, I would think some people might be willing to pay something for that on eBay.”

Stars who make millions on one film or endorsement deal may not flinch at paying a little extra in taxes, but it’s smart to consider the implications of supposed freebies and remember that the IRS may view these items as taxable income.

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The Taxability of Oscars Gift Bags originally appeared on usnews.com