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Tax Question...

Topic closed. 4 replies. Last post 12 years ago by erobinson32.

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United States
Member #247
April 15, 2002
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Posted: May 14, 2005, 4:11 pm - IP Logged

Say someone won the Powerball this week at $111 million in South Carolina or Rhode Island (7% state).

The Jackpot Analysis says that there is a 25% federal tax, and then a 7% state tax, leaving you with...

$42,432,000

after taxes and lump sum.

Would you then at the end of the year have to pay the 35% federal income tax, which would bring you to...

$27,580,800.00

I just don't understand how much a person who wins this would ACTUALLY come away with after all taxes have been taken away? Could sombody please explain this?

 Also, I read in another post that.... ( I know this is an old post, but will someone explain the Capped Federal Tax, because I have never heard of that... i'm young)

"The next PowerBall drawing is for $83M, so 55% of that comes to $45.65M. Figure 32% of the remainder goes to state and federal coffers, and you still have $31,042,000.00 in cash. Invested at five percent, that will yield a gross annual income of $1,552,100.00. Now, however, you've satisfied the federal requirements for long-term capital gains, so your federal tax is capped at 15%. Even if your state tax is 8%, you'll still net nearly $1.2M a year from your investments."

Thanks a lot.

Sam


    United States
    Member #379
    June 5, 2002
    11296 Posts
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    Posted: May 14, 2005, 4:16 pm - IP Logged

    The 25% is federal WITHHOLDING, and is applied towards your federal tax liability.

      twisted's avatar - underground
      New Jersey
      United States
      Member #2376
      September 25, 2003
      582 Posts
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      Posted: May 14, 2005, 5:03 pm - IP Logged



      Say someone won the Powerball this week at $111 million in South Carolina or Rhode Island (7% state).

      The Jackpot Analysis says that there is a 25% federal tax, and then a 7% state tax, leaving you with...

      $42,432,000

      after taxes and lump sum.

      Would you then at the end of the year have to pay the 35% federal income tax, which would bring you to...

      $27,580,800.00

      I just don't understand how much a person who wins this would ACTUALLY come away with after all taxes have been taken away? Could sombody please explain this?

       Also, I read in another post that.... ( I know this is an old post, but will someone explain the Capped Federal Tax, because I have never heard of that... i'm young)

      "The next PowerBall drawing is for $83M, so 55% of that comes to $45.65M. Figure 32% of the remainder goes to state and federal coffers, and you still have $31,042,000.00 in cash. Invested at five percent, that will yield a gross annual income of $1,552,100.00. Now, however, you've satisfied the federal requirements for long-term capital gains, so your federal tax is capped at 15%. Even if your state tax is 8%, you'll still net nearly $1.2M a year from your investments."

      Thanks a lot.

      Sam



      If the powerball annuity value is $111 million then the cash value is around 55%-56% of the annuity.  This leads to $62.4 million in cash value.  The lottery withholds 25% federal tax and whatever your state tax liability is (depending upon your state).  At the end of year, you would still owe 10% more to the federal government (the federal tax rate is 35% on anything over $319,100).  So

       $62.4 million * 65% = $40.56 million

      Since I live in a state without any state tax on lottery winnings I would end up with the whole $40.56 million after all the taxes are taken care of.  I dont know if I would still be liable for social security tax, local tax, etc.



       

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        Morrison, IL
        United States
        Member #4657
        May 13, 2004
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        Posted: May 14, 2005, 8:07 pm - IP Logged

          I don't think you would be liable for social security tax, and I highly doubt local taxes would be involved, although I am not sure on that.

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          New Member

          United States
          Member #247
          April 15, 2002
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          Posted: May 14, 2005, 9:05 pm - IP Logged

          What is the part about the federal tax being capped on long-term capital gains? Why is it only 15%? Somone please explain, I'm confused.