Should a lottery winner invest in IRA for tax purpose?

Reply #10

DELotteryPlyr — Fri, 17 Jul 2015 08:51:17 GMT

Yes, you need to be diversified.

You have done a great job starting your research. Keep going, keep reading and talking to people. You will find investments which you are comfortable with. Just watch out for 'its too good to be true' - it most likely is.

Reply #9

Raven62 — Fri, 17 Jul 2015 05:36:09 GMT

Is this your way of saying if you win a Jackpot that you'll still be entitled to the Earned Income Tax Credit (EITC

Reply #8

KY Floyd — Fri, 17 Jul 2015 04:06:02 GMT

And? Is that just your way of telling us you don't know the difference between income and earned income

Reply #7

Raven62 — Fri, 17 Jul 2015 03:20:31 GMT

http://www.irs.gov/uac/Reporting-Gambling-Income-and-Losses-on-Your-Tax-Return

Reply #6

myturn — Fri, 17 Jul 2015 00:43:52 GMT

Before doing anything, winners should get independent, professional financial advice. Make sure they are independent, not sales people getting commissions for pushing a product. Don't be afraid to get second opinions.

Reply #5

myturn — Fri, 17 Jul 2015 00:34:52 GMT

I'm not sure about one single stock , spread the risk across various industries.

Reply #4

gy65 — Thu, 16 Jul 2015 20:40:09 GMT

Winnings are not earned income.

Reply #3

OldSchoolPa — Thu, 16 Jul 2015 19:52:32 GMT

You really should consult a team of financial professionals. An IRA is an Individual Retirement Arrangement which merely provides shelter from taxes. A financial professional can cover the caveats and limits. However, if I won millions, I would rather focus on paying taxes due on the winnings and devote time to travel and family while I plan my future endeavors like attending business school, starting a business, etc.

Reply #2

KY Floyd — Thu, 16 Jul 2015 07:39:10 GMT

Even if you could invest .75 million in an IRA it wouldn't save you .75 million in taxes. At best it would just make that .75 million non-taxable. That would leave you with 4.25 million in taxable income, so at 39.6% you'd owe 1.683 million. That's still another 443k beyond the 1.25M withholding.

Depending on whether or not you're covered by a retirement plan at work or if you're self-employed you may be able to make a bigger contribution. Still, even if you could contribute 100k you're only... [ More ]

Reply #1

darthfury78 — Thu, 16 Jul 2015 06:29:43 GMT

The IRA is contribution is capped at $6K a year. The best thing to do with your winnings is take the lump sum. Once the 25% tax is deducted, invest that money into one single stock, like Disney or Apple and let it grow to around 35% of what you paid for it. From there, use the gains to pay Uncle Sam. This way,you do not have to touch the principal. Just the capital gains that's used to pay the remaining 15% of what you owe.

Should a lottery winner invest in IRA for tax purpose?

gogidolim — Thu, 16 Jul 2015 06:02:13 GMT

I am reading an article on how to avoid maximum tax bracket. One good way is to invest in IRA and this can be a tax write off. So...

Let's say I won a 5 mil scratcher in CA. The inital federal tax is 25%. I can live with that. But for the rest of 15% for the tax bracket...hmm...

I would pay 1.25 mil when I receive the check, and have to pay another 0.75 mil next year. But if I invest that 0.75 mil in IRA, then do I avoid paying that for the rest of tax bracket