taxes on lottery winnings :(Previous TopicNext Topic

I'm new here, I'm 19 and have been playing powerball since i was 14 (gotta love the immigrants at the gas stations that dont card for lottery). I was wondering how the tax's work on lottery winnings. I Live in Pennsylvania so theres no state or local tax, the powerball and usa mega site says 25% federal tax on lottery winnings, but i keep hearing i would fall into the 35% tax bracket if i won the 250 million on wednesday night. Is it 25 they take or 35, if its 35 how can they advertise 25? being that I'm only 19 i would probably take the annuity and set it up through a blind trust fund so i dont go blow all the money or have everyone and there brother calling me up, or trying to sue me.

Welcome to LP young man. Great place to socialize and make positive comments... here's a few thoughts based on my knowledge. If PA is like FL and we have no state taxes, then all you have to worry about is the FED tax issue. Yes the Powerball and MM claim the 25% tax grab right off the bat. Key issue is to research the IRS website and it will show you that in 2012 if you make over a certain amount the tax rate goes up to as high as 35%....Face it, millionaires will be paying that rate of 35% at least until Uncle Sam gets their spending under control. Figure at the end of the year you will have to mandatorily pay ANOTHER 10% income tax on top of the initial 25 that was taken the day you turned your ticket in for claiming the big prize because you are a millionaire. That being said, the current Powerball value of 250 million/ cash value of 156 million would probably be a better being taken on the cash side and paying your 35% this year. Why ?  (1)Because you know what the max bracket is right now and over the next 30 you wont know. (2) your money can always be invested and DOUBLED/TRIPLED much faster than having the long haul annuity over the next 29 years. But thats a personal choice if you want the annuity or lumpsum cash. ALWAYS consult with a tax atty, financial investor and reputable CPA firm and estate planner( lotta folks but you have time before the big claim)
They ( Lottery folks) advertise that way to make it more attractive BUT the folks who run the lotto system are not the IRS. They only take what the government sets as a minimum mandate(25%) to take. You will end up at the end of the year with a total of 35%. Remember, the Government will always get their cut befor you do !!!  Thats just the way it is.
     SOOOOOOOOOOOOOooooooooo, taking the 156 CASH plan after 35% taxes that the IRS WILL eventually take leaves you at around 101 million and change..That would be yours to do with as you please. UNLESS you start giving more than $13000.00(this year) to one person, Uncle Sam would charge YOU at the gift tax rate.....Wanna know what that is ????   BINGO...35%...again, Uncle sam is right there making sure he gets his cut AGAIN...
   Depending on your state and their rules about remaining anonomous, making the claim in a trust is always smart(talk with your tax atty. and/or personal atty. ).......Stay grounded, consult with professionals and NEVER tell anyone that you have won this kind of money. Potential family Greed and new friends will cause more trouble than a Missouri Tornado...... Good luck if you win

CDanaT's reply was fairly accurate.  One thing he didn't mention is that many people who win very large jackpots choose to make major charitable deductions in the year they win.  If one is going to do it anyway, there are tax advantages to doing it that year.  Let's say that I won $156 million cash and chose to set up a charitable trust with 35% of my win or approximately $54 million.  Much (but not all) of that donation would be deductible from my federal taxes.  The end result would be that my federal taxes for the year would be closer to 25% than 35%, so the amount that the state withheld would be fairly accurate in that case. 

Now lest someone starts saying that one "needs" the tax deduction, please remember that after donating that money in the example above, I'd be left with approximately $36 million LESS after taxes than if I'd donated nothing and just let the feds get the full 35%.

the info on USA Mega is accurate so it's 25% for you.

I'm surprised that a 19 yr old would be talking about trusts.

In Pennsylvania you can not claim a lottery prize using a blind trust. There may be another way, do some more research and explore your options. You're only 19. Please give us older people with wrinkles a chance to win. Thanks.

I find your assumptions troubling. The clerks do not check your ID and assume you are old enough. You do not check their ID and assume they are immigrants.

Interesting statement Mario 38. In the USA it is a clerks legal obligation to check an ID, even if they are close to the legal age.....the young man had no legal obligation or right to check immigration status, just an opinionof the individual(s) ,possibly based on facts or knowledge of the person(s) he dealt with. While his statement was assumed (not proved)  to be right winged or left winged, it could be independant of either side. Have no worries though, his country has freedom of choice and speech...God bless America for that !!!    Drive safely, and have a great day 

Ahh Jeeeze, here we go again.

All aboard for another trip to Touchy-Feely-ville. Get ready to be Sensitiiiiiiiive in the Land-Where-Nobody-Can-Ever-Be-Offended-By-Anything.

Please somebody just shoot me.

Now!

Please!

My response was independent of my signature.

Thats okay Rdg.......you can NOT fix "Gormless" 

Roger that, bigtime.

Behold.

Little mario, the short little hairy-legged moron in fishnet stockings is what everybody will be like in a democrat utopia.

Mindless little twits reporting each other for rule infractions.

Out searching the world for something to be "offended" by so they can report it to the authorities.

What a sad little puke of a man little mario is.

Rdg..thanks for holdin back and using your politically correct public relations ability.      Heres to winning the powerball  on WED  and paying our fair share

You're right CD.

Whenever little mario the wet blanket comes around with his tales of woe and gloom and doom, I start singing that ELO song to myself - "Don't Bring Me Down."

Then I feel better.

Further proof to the results of the study quoted in my signature.

So you're coming out, little guy. Big whoop.

I'm sure everyone is so shocked.

I know I am. 

Here, listen to my reaction: OMG!