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Understanding Euromillions taxes for U.S.

Topic closed. 22 replies. Last post 9 years ago by BaristaExpress.

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danisiri's avatar - Avatar all_for_Jesus.jpg

United States
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April 11, 2005
77 Posts
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Posted: January 23, 2006, 2:04 am - IP Logged

Given the high JP for Euromillions, I have been trying to figure out the best way to minimize income taxes and maximize interest income while still living in the U.S.  I know that the actual JP is tax-free in Europe and that if the entire amount is brought into the U.S., then it is taxable.  My question is if the JP money is left in Euros in a Swiss bank and is invested in European securities, then theoretically, the principal JP will never be taxed, only the interest income that is generated would be taxed, right?

 I ask the question, because I contacted the IRS and they told me that all income (global or domestic) is subject to income tax and must be reported on my tax return.  Gambling winnings (including lottery winnings) are classified as income, therefore according to the IRS, I would be taxed on the prinicpal JP even if I left it in a European bank, plus I would be taxed on any interest income.

So, assuming that what the IRS told me was correct and by my calculations, I would need to earn about 9% on my European investments on the taxed JP to match a 4% tax-free investment return in the US (municipal bonds and other triple tax free investments). 

If I am not taxed on the full JP but only on the interest income, then I would only need about a 5.3% European return - which leaves more room for a greater income generating potential.  Plus, by leaving the prinicipal in Euros, I can lever the increasing strength of the Euro to the weakening dollar when I do decide to convert the currency and bring some money into the U.S.

Does anyone have better information than I have been able to find?  I am working on the assumption of being totally honest and not hiding money, though I always enjoy the "creative" solutions that LP members come up with.


    United States
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    Posted: January 23, 2006, 3:55 pm - IP Logged

    It would be strange if someone would win Euro Millions and then pay tax. It'll be a lot of income tax if only one ticket would win the Euro Millions jackpot.

      danisiri's avatar - Avatar all_for_Jesus.jpg

      United States
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      Posted: January 23, 2006, 9:44 pm - IP Logged

      It would be strange if someone would win Euro Millions and then pay tax. It'll be a lot of income tax if only one ticket would win the Euro Millions jackpot.

      Allow me to clarify.  If I were a resident and citizen of one of the Euromillions member countries, then it is my understanding that I would not pay taxes on the JP.  But as a citizen and resident of the U.S., according to the IRS, I am required to pay income tax on any winnings whether foreign or domestic.

      Part of the discussion at LP about Euromillions has been on the fact that the JP is the cash value (fantastic!) and is tax-free if not brought into the U.S.  But, the IRS seems to think that even if the JP is not brought into the U.S., it is still taxable if the winner is a resident and citizen of the U.S.  It may even be taxable if I am a U.S. citizen residing in a European country if I file a U.S. income tax return (though I can qualify for a foreign tax exclusion up to $80,000). 

      So, short of becoming a European citizen prior to claiming the JP, as a U.S. citizen, I would be taxed on the JP.

      I have thought of using an offshore LLC to claim the prize and then pay myself a salary from the LLC, thereby only being taxed on the salary that I decide to pay myself.  But, that is a bit subversive and I am trying to see if there is a totally clean and honest way to avoid about $50 million in taxes.

      If not, then so be it. 

      Any suggestions?

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        United States
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        November 16, 2005
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        Posted: January 24, 2006, 2:29 am - IP Logged

        I don't know where you guys get your figures, but the best I can find with a little research is that the tax on a foreign income is 25%. That's for an individual; however I think tax on foreign income for a Partnership or LLC are income tax free as long as none of there investments are in the USA or are Invested in a US company overseas.  So I would get a really good team of tax attorneys and financial advisors together before I claimed the jackpot.    Mabey Incorprate in Ireland,  I hear they give lot's of tax breaks to Companies there much lower than in rest of Europe. 

          dvdiva's avatar - 8ball

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          September 17, 2003
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          Posted: January 24, 2006, 4:12 pm - IP Logged

          Of course the IRS is going to say give us the money. Advice is usually worth what you pay for it. Ask a well qualified pro that deals with international tax. You will have to pay for that advice but if you win it will be well worth it.

            danisiri's avatar - Avatar all_for_Jesus.jpg

            United States
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            April 11, 2005
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            Posted: January 24, 2006, 7:05 pm - IP Logged

            Of course the IRS is going to say give us the money. Advice is usually worth what you pay for it. Ask a well qualified pro that deals with international tax. You will have to pay for that advice but if you win it will be well worth it.

            Indeed, yes, the IRS is going to say to give them the money.  I was just curious to see if anyone else had given serious research into this hypothetical situation. 

            As for the 25% tax rate on foreign income, foreign income is taxed at whatever tax bracket you are at, in the case of a massive JP like this, it would be the top bracket (currently 35%).

            And, yes, I would hire the best tax attorneys and financial advisors I could get before claiming the JP, but even some of the best attorneys may not be able to save me from the IRS if we run afoul of the current tax law.  Besides, how do you find out who are the truly qualified individuals to hire?  Not being in that circle, I would not know whom to hire.  Likely, I would turn to the large investment firms and see where they take me.

            But, I did find an interesting article on secrecy and Swiss bank accounts for U.S. citizens.  If I do not invest in any U.S. securities, then Swiss banks would not report the income to the IRS, thereby evading tax (which is legal in Switzerland but not necessarily in the U.S.).  But, I still would have to pay taxes on what I pay myself from an offshore LLC, since that would technically be "earned income".

            Alas, given the huge JP, I would not be managing the money directly anyways, so I will leave the mental gymnastics up to my financial/legal team.  So whether it is the full $177 million JP or ~$120 million after taxes, it is still an incredibly large sum of resources.  What I will have to be concerned more with is my stewardship of the blessing than with whether or not I make $4 million or $7 million interest income each year, since either amount is more than what I would probably make in my lifetime!

             

              TheGameGrl's avatar - p42a
              Pennsylvania
              United States
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              June 10, 2005
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              Posted: January 24, 2006, 7:55 pm - IP Logged

              USA does its dern'est to confuse the average citizen from ever finding the loop holes or savings that can be made. And yes your correct- the percentage is 35-38%. Not including your state and local taxes having to be paid. So it racks up to 47% in some state areas.

              With that said, its wise to ask a tax lawyer . Most here are involved in winning and playing and not really qualified to give tax advice without a license. A tax lawyer has to go thru the exam and be qualified to look out for your best interest.  Georgetown has a great program in tax law and has referral programs for folks when they do need a qualified attorney in this matter.

              ________________________________

              Signature quote-If I'd agree with you , we'd both be wrong.


                United States
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                June 18, 2004
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                Posted: January 24, 2006, 7:55 pm - IP Logged

                If you were to win an overseas lottery why would you want to continue to live in America but not contribute to it in the form of taxation at the going rate? Taxation is part of the responsibility of being a U.S. citizen. Sure people don't enjoy paying taxes. But compared to the rest of the world the USA is a very comfortable society because of its infrastructure and public services and tax dollars go towards these. Tax dollars also get redistributed to help people on low wages and their families; people in their millions. Taxes also go towards paying for the military and other programs which Americans take for granted. Your avatar has a cross with the logo "All for Jesus". In your case you should change it to a dollar sign and say "All for Me".

                  Tx_Mega_Player's avatar - spider
                  BIG D Texas
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                  Posted: January 24, 2006, 11:49 pm - IP Logged

                  If you were to win an overseas lottery why would you want to continue to live in America but not contribute to it in the form of taxation at the going rate? Taxation is part of the responsibility of being a U.S. citizen. Sure people don't enjoy paying taxes. But compared to the rest of the world the USA is a very comfortable society because of its infrastructure and public services and tax dollars go towards these. Tax dollars also get redistributed to help people on low wages and their families; people in their millions. Taxes also go towards paying for the military and other programs which Americans take for granted. Your avatar has a cross with the logo "All for Jesus". In your case you should change it to a dollar sign and say "All for Me".

                  I agree!!!

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                    New Member
                    London
                    United Kingdom
                    Member #9904
                    December 27, 2004
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                    Posted: January 25, 2006, 12:25 am - IP Logged

                    I find it ridiculous that the USA taxes lottery winnings. This is unheard of elsewhere. If you play the lottery does the US tax people give you a rebate if you win nothing? This appears to be the ultimate swindle by a government. If I was a US citizen and won the Eurolottery I would invest it in Europe and not tell the US authorities. Better still, emigrate to Europe or Australia.

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                      new delhi
                      India
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                      September 20, 2005
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                      Posted: January 25, 2006, 12:29 am - IP Logged

                      Well, I too think the taxation of the lottos is a bit ridiculous. Good advice Zulu. 

                        BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                        Magnolia, Delaware
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                        Posted: January 25, 2006, 2:06 am - IP Logged

                        If you were to win an overseas lottery why would you want to continue to live in America but not contribute to it in the form of taxation at the going rate? Taxation is part of the responsibility of being a U.S. citizen. Sure people don't enjoy paying taxes. But compared to the rest of the world the USA is a very comfortable society because of its infrastructure and public services and tax dollars go towards these. Tax dollars also get redistributed to help people on low wages and their families; people in their millions. Taxes also go towards paying for the military and other programs which Americans take for granted. Your avatar has a cross with the logo "All for Jesus". In your case you should change it to a dollar sign and say "All for Me".

                        Huh, as I see it, when big business/corporations pay very little or next to nothing in taxes and the average person pays 3-4 times more than they do, as an injustice to the majority in this country!  And you can't tell me that there isn't a bunch of them out there that don't get Tax Credits every year and pay nothing every year or at the least, very, very little in taxes! So, when they start to pay their fair share, is the day I'll pay the IRS what it says I owe and not complain about it! But until then, I'll do my damnedest to keep the IRS out of my back pocket any way I can! So go waive the flag somewhere else! And if you even think of saying I'm anti- American or anything of the sort, it will be a lie for one! And second of all, you'll be showing nothing more than your ignorance!

                        Keep dreaming the impossible dream, it just may come true! Thumbs Up

                          danisiri's avatar - Avatar all_for_Jesus.jpg

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                          Posted: January 25, 2006, 6:02 pm - IP Logged

                          If you were to win an overseas lottery why would you want to continue to live in America but not contribute to it in the form of taxation at the going rate? Taxation is part of the responsibility of being a U.S. citizen. Sure people don't enjoy paying taxes. But compared to the rest of the world the USA is a very comfortable society because of its infrastructure and public services and tax dollars go towards these. Tax dollars also get redistributed to help people on low wages and their families; people in their millions. Taxes also go towards paying for the military and other programs which Americans take for granted. Your avatar has a cross with the logo "All for Jesus". In your case you should change it to a dollar sign and say "All for Me".

                          I think you missed the point of this hypothetical discussion and by the honesty disclaimer on my initial posting.  I have no problem paying taxes, but I do not want to be fleeced by our already over zealous federal and state governments.   

                          Alas, the money would not be all for me.  In fact, it would be "none for me", since the reason that I play the lottery at all is to meet the needs of others.  As for as my needs, I am already taken care of by my Savior (John 3:16, Matthew 6).  I need nothing more.  Yet, I can only do so much or reach only so many people with the limited time and income that I have.  With a gift from God of a larger financial base as a resource, my ministries would be able to expand.  Yet, the ministries can still expand without the money, since all things are possible with Him and through Him.  Indeed expansion without the money would be an even greater testament to His power and glory, since with the money, people can just say "oh, well the funding comes from a lottery win."

                          As for taxes, I feel the U.S. government has overstepped its bounds in taxation and has become a bloated bureaucracy that wastes too much money.  Our country has moved from the freedom-based republic created by the founding fathers to a socialist democracy where wealth is taken by force and redistributed by lawmakers whose primary objective is to keep their constituents happy with pork to get themselves re-elected.

                          I know for certain that I could do a better job in stewardship.  The Biblical model for taking care of the poor and needy was for people to help them directly, not to give all their money to the government and have it do it.  By doing the work yourself, you are blessed with having blessed someone else.  So in fact, it is a double blessing.

                          My avatar "All for Jesus" with the Cross on it has a two-fold meaning.  The Cross represents what He has done for me and the "All for Jesus" means every quark of my being, every work, every cent, every breath is for Him.  All that I currently have is God's.  All that He gives me in the future is really His anyways.  The question people should ask themselves is not how much do I have to give back to God but rather how much of God's resources would I dare keep for myself? 

                          Normally, LP is a nice place to discuss topics in an intellectual manner.  Everytime people try to start flame wars, I usually stay away for awhile.  I thought perhaps this time would be different, but I guess I should just learn that I am bound to be attacked personally no matter what I discuss.  But, hey, I do not really care what you think of me or how much you want to belittle me because of my views.  The last time I checked, Todd still allowed people to voice their opinions on lottery topics here at LP and I was just trying to get an interesting discussion going.

                          But, uh, oh well, so much for that. 

                          Take care and God bless!


                            United States
                            Member #5122
                            June 18, 2004
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                            Posted: January 25, 2006, 8:46 pm - IP Logged

                            If you were to win an overseas lottery why would you want to continue to live in America but not contribute to it in the form of taxation at the going rate? Taxation is part of the responsibility of being a U.S. citizen. Sure people don't enjoy paying taxes. But compared to the rest of the world the USA is a very comfortable society because of its infrastructure and public services and tax dollars go towards these. Tax dollars also get redistributed to help people on low wages and their families; people in their millions. Taxes also go towards paying for the military and other programs which Americans take for granted. Your avatar has a cross with the logo "All for Jesus". In your case you should change it to a dollar sign and say "All for Me".

                            Huh, as I see it, when big business/corporations pay very little or next to nothing in taxes and the average person pays 3-4 times more than they do, as an injustice to the majority in this country!  And you can't tell me that there isn't a bunch of them out there that don't get Tax Credits every year and pay nothing every year or at the least, very, very little in taxes! So, when they start to pay their fair share, is the day I'll pay the IRS what it says I owe and not complain about it! But until then, I'll do my damnedest to keep the IRS out of my back pocket any way I can! So go waive the flag somewhere else! And if you even think of saying I'm anti- American or anything of the sort, it will be a lie for one! And second of all, you'll be showing nothing more than your ignorance!

                            You complain about businesses avoiding tax but then want to be just like them and pay next to nothing yourself. And how much do you pay in things like sales tax living there in Delaware? Oh, that's right, you don't pay any sales tax. Yeah pal, you really can stand shoulder to shoulder with "the average person" you mention in your last comment. Poor you. You sound just like many people in that generation of Americans currently heading into retirement who feel just because you breathe air you should be given royal treatment and life should be free or better yet with cash back. It's clear from your remarks you really believe being selfish is the true mark of being an American. You're wrong of course but obviously you just felt the need to display your ignorance.


                              United States
                              Member #5122
                              June 18, 2004
                              68 Posts
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                              Posted: January 25, 2006, 9:29 pm - IP Logged

                              If you were to win an overseas lottery why would you want to continue to live in America but not contribute to it in the form of taxation at the going rate? Taxation is part of the responsibility of being a U.S. citizen. Sure people don't enjoy paying taxes. But compared to the rest of the world the USA is a very comfortable society because of its infrastructure and public services and tax dollars go towards these. Tax dollars also get redistributed to help people on low wages and their families; people in their millions. Taxes also go towards paying for the military and other programs which Americans take for granted. Your avatar has a cross with the logo "All for Jesus". In your case you should change it to a dollar sign and say "All for Me".

                              I think you missed the point of this hypothetical discussion and by the honesty disclaimer on my initial posting.  I have no problem paying taxes, but I do not want to be fleeced by our already over zealous federal and state governments.   

                              Alas, the money would not be all for me.  In fact, it would be "none for me", since the reason that I play the lottery at all is to meet the needs of others.  As for as my needs, I am already taken care of by my Savior (John 3:16, Matthew 6).  I need nothing more.  Yet, I can only do so much or reach only so many people with the limited time and income that I have.  With a gift from God of a larger financial base as a resource, my ministries would be able to expand.  Yet, the ministries can still expand without the money, since all things are possible with Him and through Him.  Indeed expansion without the money would be an even greater testament to His power and glory, since with the money, people can just say "oh, well the funding comes from a lottery win."

                              As for taxes, I feel the U.S. government has overstepped its bounds in taxation and has become a bloated bureaucracy that wastes too much money.  Our country has moved from the freedom-based republic created by the founding fathers to a socialist democracy where wealth is taken by force and redistributed by lawmakers whose primary objective is to keep their constituents happy with pork to get themselves re-elected.

                              I know for certain that I could do a better job in stewardship.  The Biblical model for taking care of the poor and needy was for people to help them directly, not to give all their money to the government and have it do it.  By doing the work yourself, you are blessed with having blessed someone else.  So in fact, it is a double blessing.

                              My avatar "All for Jesus" with the Cross on it has a two-fold meaning.  The Cross represents what He has done for me and the "All for Jesus" means every quark of my being, every work, every cent, every breath is for Him.  All that I currently have is God's.  All that He gives me in the future is really His anyways.  The question people should ask themselves is not how much do I have to give back to God but rather how much of God's resources would I dare keep for myself? 

                              Normally, LP is a nice place to discuss topics in an intellectual manner.  Everytime people try to start flame wars, I usually stay away for awhile.  I thought perhaps this time would be different, but I guess I should just learn that I am bound to be attacked personally no matter what I discuss.  But, hey, I do not really care what you think of me or how much you want to belittle me because of my views.  The last time I checked, Todd still allowed people to voice their opinions on lottery topics here at LP and I was just trying to get an interesting discussion going.

                              But, uh, oh well, so much for that. 

                              Take care and God bless!

                              You wrote: "But, hey, I do not really care what you think of me..."

                              Really? So then why did you write eight paragraphs and quote scripture if you really don't care?

                              You wrote: "All that I currently have is God's. All that He gives me in the future is really His anyways. The question people should ask themselves is not how much do I have to give back to God but rather how much of God's resources would I dare keep for myself?"

                              Jesus said: "Go and sell ALL that thou hast, and give it to the poor; and come and follow me." 

                              From your original remarks of seeking advice on tax avoidance using off shore bank accounts it is very clear you are quite prepared to keep everything you get strictly for yourself. If you really want to pick up your cross then give away all the money and assets you currently own to the poor. And remember that every little bit helps so don't say the challenge is too great and therefore you won't do it. There are plenty of well established charities of every single denomination out there too so you don't need to set up your own "ministry" first to channel funds or complain that government redistribution is socialist or inefficient.

                              Few people actually give away all they have to the poor because most people realize that doing so would force them to join the ranks of the poor. Jesus lived a life of poverty and if you are a true beliver then you will as well.

                              Greed comes in many ways and trying to hide it by praying to a divine power for vast sums of money as well as telling others far and wide that you'll use such a huge fortune to help others really doesn't wash. Bill Gates and other wealthy philanthropists have already beat you to the punch on that so you don't need to wait to you are filthy rich to start giving.

                              God doesn't dare us to keep anything. I dare you though to give all you own now away because you know yourself there many people out there who are in greater need for your belongings.

                              Eye of the Needle, buddy, Eye of the Needle. But take the log out of your own eye first; it should help you see life a lot more clearly.