Where do you guys come up with the 35% Federal Tax rate

Reply #20

Rick G — Wed, 07 Mar 2007 21:02:13 GMT

This is right on target with the 2006 tax tables.

I just skimmed this thread so I might have missed some points already made. Forgive me if I repeat something. Someone mentioned FICA, medicare etc. These do not apply to gambling winnings. Also as Todd said, we're talking about federal tax liability and not individual state taxes.

That said, on page 79 of the 2006 1040 tax booklet Section A, filing as Single, the tax rate is 35% minus $20,139 if your taxable income is more than $336,5... [ More ]

Reply #19

CA LotteryGuy — Wed, 07 Mar 2007 16:11:12 GMT

four4me....your post was accurate except for the word due. When one says total tax due I take it that would be the total tax liabilty when everythinng is all said and done.

What you are talking about here is tax withheld. The tax withheld for a MD resident would be as you stated. The tax is not due as you don't even see it, it is taken out before you get your cut of the money. Your total tax due (meaning what you will owe in total taxes when it is time to settle your tax bill with the I... [ More ]

Reply #18

Badger — Wed, 07 Mar 2007 12:46:29 GMT

It's been a couple years since I talked to the lottery office, yeah. Not that it mattered to me, since I haven't had to worry about more than a $500 ticket in al that time. <g

Reply #17

justxploring — Wed, 07 Mar 2007 07:20:41 GMT

The tax tables are very clear on the IRS web site. Example: For a single person filing

If taxable income is over--But not over--The tax is:

$0$7,82510% of the amount over $0

$7,825$31,850$782.50 plus 15% of the amount over 7,825

$31,850$77,100$4,386.25 plus 25% of the amount over 31,850

$77,100$160,850$15,698.75 plus 28% of the amount over 77,100

$160,850$349,700$39,148.75 plus 33% of the amount over 160,850

$349,700no limit$101,469.25 plus 35% of the amount over 349... [ More ]

Reply #16

four4me — Wed, 07 Mar 2007 06:54:17 GMT

I think that many people are adding there state tax to the 25% fed tax in which case many people might come up to around 35% total tax due.

For prize payments over $5,000 taxes will be withheld as follows:

25.0% Federal Tax

7.75% State tax (Maryland residents)

Total tax due 32.75

Reply #15

KY Floyd — Wed, 07 Mar 2007 06:25:25 GMT

Chuckie,

The reason the part you quoted from the IRS says withholding in big bold letters is because it's about withholding, not what your tax will be. What you actually owe depends on your total income, your total deductions and your filing status. If you win $5000 and that's all you make for the year you'll get a refund when you file a return. If your taxable income is much higher you may be taxed at higher rates on some of your income.

If you win even a modest jackpot you will fin... [ More ]

Reply #14

CountingMan — Wed, 07 Mar 2007 03:38:06 GMT

Ladies, Gentlemen:

Lottery winnings are considered gambling winnings. They are not earnings, in the sense that you would be paying FICA, Medicare, etc. They are not subject to these taxes, nor self employment taxes. They are simply income that is not earned (you didn't work or put time in on the job) to obtain them.

I would agree that with previous synopsis concerning the withholding of 25% at the initial winning handover, with an additional 10% being due later in the year. At this... [ More ]

Reply #13

TheGameGrl — Wed, 07 Mar 2007 02:29:03 GMT

fica and medicare are not additional pay ins from the lottery winnings. Not sure where that myth came into play, but NO, there is not additional fica/medicare needed to be paid in . unless your employer goofed! If your relative gifts you 10k, you arent responsible for more fica/medicare...same holds true for this particular .

Reply #12

CA LotteryGuy — Wed, 07 Mar 2007 01:59:53 GMT

Badger not sure when you called the lottery (as there was a change in withholding amount a few years back) but here is the information from the Wisconsin Lottery Web Site:

Do I have to pay taxes on my winnings? All lottery winnings are taxable. The Lottery automatically deducts 25 percent federal for any winnings $5,001 or over, and 6.75 percent state income tax for any winnings over $1,999.

Not sure about the FICA/Medicare issue. Doesn't sound right, maybe otherswill g... [ More ]

Reply #11

Badger — Wed, 07 Mar 2007 01:38:33 GMT

Since a lottery win is considered earned income on your 1040, you also have to pay FICA and Medicare. I think Medicare has a income ceiling beyond which you don't have to pay, but you still have FICA. So I think when people say 30 or 35%, they are lumping in the other taxes with it. Not everything that comes out of the check is strictly Federal tax.

I've never won a big jackpot here, but according to the way it was explained to me by a call to the lottery office, they do take out 30% for... [ More ]

Reply #10

CA LotteryGuy — Wed, 07 Mar 2007 01:09:49 GMT

Jose400..here is the federal tax situation in a nutshell for a state that does not tax winnings:

You win $10 million. The state lottery witholds 25% and sends it to the IRS. At this point you get a check for $7.5 Million. Come tax filing time your income (say the lottery winnings were your only souce of imcome) will be $10 million. You, for discussion sakes, are in the top income bracket of 35% or $3.5 million. (I say for discussion sakes because there are many ways you can lessen this... [ More ]

Reply #9

Todd — Wed, 07 Mar 2007 00:13:43 GMT

You are correct, there is no way to avoid the IRS. But there are ways to greatly reduce your tax, and the people who work hardest at understanding how things work and are willing to invest time, they will end up paying less.

Reply #8

Todd — Wed, 07 Mar 2007 00:11:45 GMT

Not my state. NJ has no tax on lottery prizes. There are others like mine. Check out Jackpot Analysis at USA Mega (www.usamega.com).

Also, as I mentioned above, I was only talking about Federal taxes. I know everyone wants to put 2 cents in about this state tax or that, but the question in this thread was only about federal tax. And of course I was talking about US residents. Yes, there are exceptions, and I think anyone would realize that.

Reply #7

fbird — Wed, 07 Mar 2007 00:03:40 GMT

shoot...the gov't taxes you butt when you check out to the great beyond...but if you were to hit the mega millions tonight there is at one thing....you could AFFORD to pay your taxes...LOL

Reply #6

Jose400 — Tue, 06 Mar 2007 23:51:14 GMT

Yes, but isn't there federal, state tax, as well as income tax on the winnings?

Someone correct me if I'm wrong but the way I figure it if you won $10 million,

you'll only see about $3.5 million after taxes at most.

From there if you invest that at 5%+ that would be a bit more than $175,000

before taxes. Seems like there's no way to avoid the irs every which way

you turn.

Reply #5

chuckiec25 — Tue, 06 Mar 2007 23:47:21 GMT

Thanks for the response. Wanted to make sure I wasn't missing something.

Good luck to everyone tonight!!

My prediction: there will be 3 winning tickets and I won't be one of them.

Reply #4

pwise125 — Tue, 06 Mar 2007 23:47:15 GMT

Also don't forget your state will want their cut for all they did to bring about your good fortune!! And most likely your city, you win = they win in their mind!! These vary so much depending where you live. I think OH is about 3.5% but Calif is over 11% I have heard! Some cities are 2% but here again it varies. So 25% + 11% + 2% could = as much as 38

Reply #3

justxploring — Tue, 06 Mar 2007 23:44:48 GMT

People have tax write-offs, so of course the amount paid varies by a number of factors. In Florida (since there is no state income tax) the tax withheld is automatically 25% if you are resident. If a non-resident alien, they hold 30%. (Specifics are on the site.) However, IMHO I think it's always best when someone wins millions to put aside enough to cover the maximum. I realize that only a portion would be taxed at that amount, but there have been many cases where winners (not just the lotte... [ More ]

Reply #2

sook7b — Tue, 06 Mar 2007 23:37:45 GMT

here in ky for state plus fed. tax total wa6%---25

Reply #1

Todd — Tue, 06 Mar 2007 23:33:47 GMT

Chuckiec25,

YOU are correct. Anyone going around saying that the gov't withholds 35% is WRONG.

The exact figure is 25% for federal tax withholding.

But some people will go around complaining about how the top tax bracket is 35% (or whatever it is). Well, who cares? Do these people not understand that there are ways of dealing with your money that will result in varying tax bills? Do any of these people think Donald Trump pays 35% on every cent he earns

Where do you guys come up with the 35% Federal Tax rate

chuckiec25 — Tue, 06 Mar 2007 23:21:38 GMT

I am under the impression that if somone won a large amount of money, the tax rate would be 25% - 28% for federal taxes. I am basing this info from the info from the irs website.

Why does people on the board reference the rate at 35%? I am aware that they take 25% off the top but where does the additional 10% come from?

This is my first post so I hope I didn't break any rules.

From the IRS site

2. Sweepstakes, Wagering Pools, and Lotteries

File Form W-2G for each person to... [ More ]