|Posted: November 11, 2005, 7:43 am - IP Logged|
Thank you. So if I won, that would mean that I will still be in the high tax bracket every year until my money get low? I think I'm confusing myself. Were you saying that only the interest is taxed and not my total asset amount? I know a financial advisor would explain all of this to me but I haven't won anything, I'm just trying to get an insight on the lottery and how it works.
Basically, what happens is this:
1. You Win. Start Screaming.
2. You go to lottery HQ and fill out a claim.
3. You now have a decision: a) You can take payments over a certain amount of time (i.e., MM, 26 years). With this option, you will pay taxes on EACH & EVERY installment payment you receive, along with taxes on any interest you make by putting the money in the bank, plus regular employment income taxes, or b) You can take one lump sum. With this option, you are taxed on the cash value of the advertised JP, but this is the ONLY time you pay tax on the winnings. Any further taxes you pay would be the result of interest income, which you are taxed on every year. There are other situations in either scenario where you may have to pay additional tax, such as the gift tax. A financial advisor is best, but this is a general outline.
4. Choose your option, and live life to the fullest.