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State Tax on Lottery Win

Topic closed. 21 replies. Last post 11 years ago by dvdiva.

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dvdiva's avatar - 8ball

United States
Member #2338
September 17, 2003
2063 Posts
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Posted: February 5, 2006, 11:29 pm - IP Logged

Can someone answer this for me?  I'll read many posts about tax and people use 25 or 28% for federal tax.  I believe the Federal personal tax is about 35% on a large jackpot. It used to be higher, but 2006 maximum income tax is 35%. So if you live in a state where tax is imposed (not in FL) then you could end up paying about 42% of your total winnings and that's AFTER you give up about 1/2 to take the lump sum.  Then they expect you to pay a huge Gift Tax if you want to give it away! Several lottery sites show they deduct 28% for federal, but I think the winner would need to pay more on a large jackpot unless he has a lot of deductions.

I copied this from the IRS website for 2006 so I think I am correct.

 Schedule X — Single

If taxable income is  over--But not over--The tax is:
$0$7,55010% of the amount over $0
$7,550$30,650$755 plus 15% of the amount over 7,550
$30,650$74,200$4,220.00 plus 25% of the amount over 30,650
$74,200$154,800$15,107.50 plus 28% of the amount over 74,200
$154,800$336,550$37,675.50 plus 33% of the amount over 154,800
$336,550no limit$97,653.00 plus 35% of the amount over 336,550

 

It means that it will amount to roughly 35%. It will be a little lower but not by much. If you give it away to a charity then there is no gift tax nor if you put people on the claim ticket initially. While the lottery will deduct 28% many winners would recieve an unpleasant surprise because they would be expected to file a quarterly tax report and most are just used to w-2 deductions.

You would have to tack on state and city income tax as well. 

    justxploring's avatar - villiarna
    Wandering Aimlessly
    United States
    Member #25360
    November 5, 2005
    4461 Posts
    Offline
    Posted: February 6, 2006, 1:24 am - IP Logged

    Prisoner Six:  "I also plan to claim it anonymously through a trust or a corporation, using an attorney to represent me in collecting the ticket.  Another thing I also plan to do is not quit my job right away until after the excitement dies down.  If I all of a sudden quit after a big win, it will raise a red flag."

    Very few states will let you remain anonymous, although you can keep yourself out of the spotlight. People here who have claimed their winnings through an attorney and in the name of a corporation still get their names in the paper. I know this is silly for me to wonder about because I probably will never win millions of dollars, but one of the first things a person should do is talk to a good attorney who knows a lot about setting up a Trust or LLC and the "gifts" Chewie mentioned. So my biggest question has always been "where do I find this man/woman I can trust with all this money?" Any suggestions here? I've gotten some pretty terrible advice from lawyers in the past. I'm surrounded by millionaires so I guess I could hang out at the fancy salons and spas and kibitz.  I live in Florida so I suppose I could call Disney and get a referral!

      LOTTOMIKE's avatar - cash money.jpg
      Tennessee
      United States
      Member #7853
      October 15, 2004
      11338 Posts
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      Posted: February 6, 2006, 7:11 am - IP Logged

      i just took a hit on the amount of money i would've gotten back on my taxes because of lottery wins of 5,000 in 2005.i wrote about it in my blog.......


        United States
        Member #379
        June 5, 2002
        11296 Posts
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        Posted: February 6, 2006, 2:23 pm - IP Logged

        Can someone answer this for me?  I'll read many posts about tax and people use 25 or 28% for federal tax.  I believe the Federal personal tax is about 35% on a large jackpot. It used to be higher, but 2006 maximum income tax is 35%. So if you live in a state where tax is imposed (not in FL) then you could end up paying about 42% of your total winnings and that's AFTER you give up about 1/2 to take the lump sum.  Then they expect you to pay a huge Gift Tax if you want to give it away! Several lottery sites show they deduct 28% for federal, but I think the winner would need to pay more on a large jackpot unless he has a lot of deductions.

        I copied this from the IRS website for 2006 so I think I am correct.

         Schedule X — Single

        If taxable income is  over--But not over--The tax is:
        $0$7,55010% of the amount over $0
        $7,550$30,650$755 plus 15% of the amount over 7,550
        $30,650$74,200$4,220.00 plus 25% of the amount over 30,650
        $74,200$154,800$15,107.50 plus 28% of the amount over 74,200
        $154,800$336,550$37,675.50 plus 33% of the amount over 154,800
        $336,550no limit$97,653.00 plus 35% of the amount over 336,550

         

        It means that it will amount to roughly 35%. It will be a little lower but not by much. If you give it away to a charity then there is no gift tax nor if you put people on the claim ticket initially. While the lottery will deduct 28% many winners would recieve an unpleasant surprise because they would be expected to file a quarterly tax report and most are just used to w-2 deductions.

        You would have to tack on state and city income tax as well. 

        Isn't the current Federal withholding 25% (unless it changed January 1)?

          TheGameGrl's avatar - character catafly.jpg
          A long and winding road
          United States
          Member #17084
          June 10, 2005
          4523 Posts
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          Posted: February 6, 2006, 7:06 pm - IP Logged

          The 25% is the minimum that the States can with-hold on the High end winners for federal taxes.( Those with $50k and above in claims).

          The states only do this to stay on the good side of the fereral government. Technically ( and its yet to be challenged) you dont have to claim your tax or pay in til the end of the year. So the taking of the 25% is merely an act of good faith that the claimant WILL have to pay in some sorts by years end.  Even a good tax attorney will tell you that prepaying may appear *safe*, its not always financially wise to do so. Tax evasion would be imposed if you didnt file a claim or you deliberately cooked the books..but that is an entirely other issue.

           

          ~~Is it true, Is it kind,Is it necessary. ~~~

           Thanks be to the giving numbers: 1621,912,119 02014

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            EU
            Estonia
            Member #4217
            April 1, 2004
            25 Posts
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            Posted: February 6, 2006, 11:35 pm - IP Logged

            Is withholding tax for aliens 30% (i belive i saw that in somewhere) or 35% as well?

              dvdiva's avatar - 8ball

              United States
              Member #2338
              September 17, 2003
              2063 Posts
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              Posted: February 7, 2006, 2:55 am - IP Logged

              It depends on the aliens being foreign nationals or extraterrestrial.