Lower Tax Burden for Winners?

Reply #10

Think — Tue, 12 Jan 2016 04:03:53 GMT

Beautiful!

Thank you dddwww. Welcome to the LP!

I hope anyone reading this now fully realizes my point.

The point being to hire a professional preferably from a big law firm that deals with this stuff.

Most people don't really stop to ponder the idiocy of the way our tax system works. One way to possibly remedy this would be to have taxes due on election days.

A complex convoluted, clunky, junky tax code sure wastes a lot of productivity and causes lots of mistakes... [ More ]

Reply #9

MegaWinner — Mon, 11 Jan 2016 21:17:49 GMT

At the end of the day, even if the gov took 50%, I'd still have a helluva lot more money than I did before!

Good luck everyone

Reply #8

SilverLion — Mon, 11 Jan 2016 20:45:18 GMT

Self Picks should be taxed as Capital Gains ( I think 15%)

Quick Picks should be taxed as Income (I think as you say 39.6%)

That I think would be fair.

Reply #7

dddwww — Mon, 11 Jan 2016 19:43:29 GMT

Not going to argue whether a tax is a fine but the Pease Amendment uses the lesser of 3% of the amount your income is over the Pease limit or 80% of your charitable contribution.

The 80% rule only comes into play if your charitable contributions are roughly less than 3.75% of your adjusted gross income.

If you have an AGI of $100M and donate more than $3.75M then the 80% rule doesn't apply and you essentially only lose the deduction on that first $3.75M, every dollar of every contribution... [ More ]

Reply #6

dddwww — Mon, 11 Jan 2016 19:30:37 GMT

There is no fine associated with the Pease amendment

Let's take an example, you have an AGI of $100M from the lottery and no deductions

You will pay approx $40M in federal taxes

Now let's say you were very generous and donated $50M to a charitable organization and that is all your deductions

Your charitable deductions have to be reduced by the lesser of 3% of the amount you are over the Pease limit (roughly $100M) , $3M

OR

80% of your charitable deductions, $40M

Since... [ More ]

Reply #5

Think — Mon, 11 Jan 2016 18:01:06 GMT

Most people do not understand that the way Obamacare was passed by the supreme court is that the supreme court established that taxes were really fines.

There also is some good tax information on the internet -

http://taxfoundation.org/article/2016-tax-brackets

Also on Pease -

http://taxfoundation.org/blog/pease-limitation-itemized-deductions-really-surtax

until Pease has phased-out 80 percent of the value of the itemized deductions.

80 percent of 40 (.396) pe... [ More ]

Reply #4

slickster505 — Mon, 11 Jan 2016 14:14:51 GMT

Good points. I did the easy thing and just plugged in numbers into TurboTax.

Assuming the cash value reaches 1 billion and I take the lump sum and for simplicity purposes I am not counting state liabilities.

Obviously if I make no donation, I am on the hook for the 39.6% rate. BTW I found out not all my winnings would be taxed at 39.6....only the amount over 400,000. Irrelevant in the grand scheme of a billion jackpot where the majority falls in the 39.6 bracket but still.

The rough est... [ More ]

Reply #3

KY Floyd — Mon, 11 Jan 2016 08:00:56 GMT

Another good reason to consult a professional is that the advice you get on internet forums may be simplified, or even wildly inaccurate.

For example, the 3.8% tax is actually called the Net Investment Income Tax because it applies to investment income. If you win the lottery the prize money is regular income, not investment income, and isn't subject to the extra 3.8% tax. Even if it was potentially subject to the tax, the tax is based on the lesser of your adjusted gross income above the thr... [ More ]

Reply #2

Think — Mon, 11 Jan 2016 05:42:10 GMT

There are many things to consider. One is the extra 3.8% Obamacare tax that kicks in around $250,0000 and another is the Pease fine (kicks in around $300,000).

Effectively, with these big jackpots, what the Pease fine does is it fines you about 33% of your charitable contribution. Thus for every $3 dollars you give to charity you have to pay a $1 in fines to the U.S. Government.

eg If you give away $3 million then you pay a $1 million fine.

At any rate its just another reason y... [ More ]

Reply #1

ArizonaDream — Mon, 11 Jan 2016 03:47:57 GMT

I just heard about someting called the Pease limitation on itemized deductions. It seemed rather complicated, but apparently you won't be able to deduct as much as you might have expected.

Lower Tax Burden for Winners?

slickster505 — Mon, 11 Jan 2016 02:50:46 GMT

We all know that the fed tax is 39.6% plus whatever your state takes as well

Ideas to lower your tax burden:

Donations to church: Most people donate 10%. How would a 10% donation lower one's tax burden

Charities in general

Irrevocable trusts(do these play a factor?)

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Or is it better to just have the feds take 25% withholding only and move out of the US and have the IRS try and hunt you down for the remainder in a country where the IRS has no jurisdiction.... [ More ]