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You win the powerball or mega millions, Taxes owned??

Topic closed. 17 replies. Last post 3 months ago by Toronto.

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Posted: January 16, 2014, 3:26 pm - IP Logged

Say you win 93 million, federal and your state taxes are taken out.  Now for the next year, do you just own income taxes on what you received from your winnings?  ( you did not work, you are retired )

 

Example:  cash take home after lottery corporation takes federal and your state taxes out is 52 million.  Now for the next year, you will have to pay 5.75%  income taxes on the 52 million that you won in the previous year. 

 

Does that sound close to being correct?

    RJOh's avatar - chipmunk
    mid-Ohio
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    Posted: January 16, 2014, 3:36 pm - IP Logged

    The amount of taxes withheld is never the complete amount owed, you'll know that at the end of the year when you calculate your taxes and file.

    * Thoses who can, do * 
    * thoses who can't, just talk *
    Roll Eyes 

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      Posted: January 16, 2014, 3:41 pm - IP Logged

      Yes, that's what winners need to know before they buy the mansion, the expansive cars, the jet and so on.

        RJOh's avatar - chipmunk
        mid-Ohio
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        Posted: January 16, 2014, 3:52 pm - IP Logged

        I doubt if any winner would plan to spend every penny before the end of the year, besides even a mansion and other expensive stuff require funds for maintance.  A mansion will generate a big tax bill every year you own it.

        * Thoses who can, do * 
        * thoses who can't, just talk *
        Roll Eyes 

          noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
          Bay Area/ California
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          Posted: January 16, 2014, 4:04 pm - IP Logged

          Say you win 93 million, federal and your state taxes are taken out.  Now for the next year, do you just own income taxes on what you received from your winnings?  ( you did not work, you are retired )

           

          Example:  cash take home after lottery corporation takes federal and your state taxes out is 52 million.  Now for the next year, you will have to pay 5.75%  income taxes on the 52 million that you won in the previous year. 

           

          Does that sound close to being correct?

          You owe the following year as well- if my math is correct,  you tax free from the Fed by the 3rd year after your win UNLESS you invested in something or bought a house etc, etc.
          I stand to be corrected since l am not a tax attorney or consultant.

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            Posted: January 16, 2014, 4:13 pm - IP Logged

            Well that's something else to think about, Fed taxes possible up too 3 years to pay.

              maringoman's avatar - kobold
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              Posted: January 16, 2014, 5:04 pm - IP Logged

              Say you win tomorrow's night MM jackpot and claim it on Monday morning. You will pay withholding taxes on that jackpot on Monday morning as you claim the jp. In April 2015 when you file for 2014 taxes you will most likely end up paying taxes because the jp pushed you to the top income bracket. But if you don't earn any income at all in the year 2015 then in 2016 you will not owe any taxes.

              Alright, my turn.

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                Posted: January 16, 2014, 5:12 pm - IP Logged

                Say you win tomorrow's night MM jackpot and claim it on Monday morning. You will pay withholding taxes on that jackpot on Monday morning as you claim the jp. In April 2015 when you file for 2014 taxes you will most likely end up paying taxes because the jp pushed you to the top income bracket. But if you don't earn any income at all in the year 2015 then in 2016 you will not owe any taxes.

                So are you saying in 2016 you wouldnt pay anything on the whatever you have left of the win? Like say you didnt invest the money you just put it in the bank all you would pay taxes on is the interest or the whole amount in the bank PLUS the interest for 2016 tax

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                  Posted: January 16, 2014, 5:27 pm - IP Logged

                  I win 100 million in lump sum. 25% is automatically withheld for federal taxes + 5% state income withheld as well. So I only get $70 million deposited to my account. Let's assume I don't invest at all in 2014; at the end of the year I am left with 70 still in my account.

                  Let's assume the total upper bracket rate for federal is 40%. When I file for taxes in April 2015 for my 2014 fiscal year...first, I can choose to deduct all the sales tax within a state that I paid throughout the year (assuming I maybe bought tons of property or just kept all the receipts of everything I purchased) or otherwise 5% state income. My taxable income for federal becomes $95 million.

                  I then use this to calculate the total amount I have to pay @ the 40% rate...the amount I owe will obviously be more than the 25% taken out immediately at the time of winning and I pay the difference: 38 [95*.4] - 25 withheld = 13 million.

                  I will not owe any new tax on whatever I have left (57 million) in any subsequent year.

                    maringoman's avatar - kobold
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                    Posted: January 16, 2014, 5:52 pm - IP Logged

                    So are you saying in 2016 you wouldnt pay anything on the whatever you have left of the win? Like say you didnt invest the money you just put it in the bank all you would pay taxes on is the interest or the whole amount in the bank PLUS the interest for 2016 tax

                    You will still pay some negligible taxes such as sales tax when you buy things at the store and property taxes if you own property but no significant taxes if you just bank your money for the whole of 2015. The little interest earned there shall be your only taxable income.

                    Alright, my turn.

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                      Posted: January 16, 2014, 6:03 pm - IP Logged

                      Now, let's say I invest the 57 million in something that pays both a dividend and can appreciate/depreciate in value starting January 1, 2015. I exit this investment on Jan 15, 2016 (over a year later); a dividend of 5 million is paid July 1, 2015. The $57 million invested also grew to 65 million from 1/1/2015 to 1/15/2016.

                      For the dividend (in April 2016 for fiscal year 2015), I will pay any state/local income, federal income (40%), and medicare tax (up to 3.8%) owed. In April 2017 when I file taxes for my 2016 fiscal year in which I gained $8 million (65-57), I will pay capital gains state taxes (depends on state), federal taxes (20% top rate), and medicare tax on that $8 million. The top federal rate is only 20% because it is long-term capital gains, the price appreciation I received was for a holding period over 1 year.

                      Then there are some more complex things. If I moved to Alaska during 2015, and live there for a total of 183 days. I would not file a state return nor pay state income tax for 2015. If I invested in municipal bonds, I would be exempt from federal taxes on any returns. If I invested in savings bonds, I would not have to pay state or local taxes on any returns.

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                        Posted: January 16, 2014, 9:39 pm - IP Logged

                        You're talking about appreciation like you're taxed on it annually. Was the gain realized? If it's just paper gains, that's unrealized and you don't pay on that. Any dividends paid by those stocks, yes, but not the paper gains. If you've sold/realized the gains, then 23.8% long term capital gains tax if you've held those stocks for over a year, less than a year is taxed as normal income at 39.6%.

                          whiteballz's avatar - Lottery-015.jpg
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                          Posted: January 18, 2014, 12:04 pm - IP Logged

                          If I moved to Alaska during 2015, and live there for a total of 183 days. I would not file a state return nor pay state income tax for 2015.

                          You could also move to Florida and Nevada and not need to tax state income too. Or better yet, you can live in Puerto Rico 183 days out of the year and be exempt from paying federal tax on investment income. http://www.puertoricoistheanswer.com/attraactingthewealthy.html

                          .

                            CDanaT's avatar - tiger avatar_04_hd_pictures_169016.jpg
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                            Posted: January 18, 2014, 3:41 pm - IP Logged

                            If I moved to Alaska during 2015, and live there for a total of 183 days. I would not file a state return nor pay state income tax for 2015.

                            You could also move to Florida and Nevada and not need to tax state income too. Or better yet, you can live in Puerto Rico 183 days out of the year and be exempt from paying federal tax on investment income. http://www.puertoricoistheanswer.com/attraactingthewealthy.html

                            You can stay in Texas without incurring a state income tax as well.....40% to the feds is bad enough  Bash

                            Stay Positive, Believe and good things will come your way

                              mikeintexas's avatar - h t2.jpg
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                              Posted: January 18, 2014, 3:50 pm - IP Logged

                              You can stay in Texas without incurring a state income tax as well.....40% to the feds is bad enough  Bash

                              39.6%  We Texans have a reputation for stretching the truth, thanks to folks like you.

                              My mother told me at least a hundred gazillion times not to exaggerate.

                              Wink