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Winning the Jackpot and taxes.

Topic closed. 52 replies. Last post 7 years ago by joshuacloak.

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truecritic's avatar - PirateTreasure
Michigan
United States
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September 24, 2005
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Posted: February 21, 2010, 4:39 pm - IP Logged

"if your on welfare here you can get 2000 cash 1500 for food thats 42,000 a year."

sounds like I better move to michigan.

sully16 explained that was for Section 8 people.  Section 8 is a Federal Program.  I admit I had heard of it but never knew details. 

Google

So, lucky you, you can probably apply right where you live.

    Hermanus104's avatar - 5027340606 1e360c8038_s.jpg
    Northern Virginia
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    Posted: February 21, 2010, 6:14 pm - IP Logged

     I only have to pay federal tax. California doesn't charge state tax for lottery winnings.

     Funny things is that the overall tax percentage for the United States is lower than other developed nations. Still, they charge higher tax for lotteries. In Europe, as you know, you don't pay tax for jackpot winnings.

    That is the way that I feel it should be. You WON the money, therefore you should be able to do with it what you please without the government taking it away from you.

    Today's winning 3-ball is going to be a number between 000 and 999.

    In a lot of states, lotteries benefit education. That makes the REAL winners the only people who can't play!

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      CA
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      Posted: February 21, 2010, 7:36 pm - IP Logged

      That is the way that I feel it should be. You WON the money, therefore you should be able to do with it what you please without the government taking it away from you.

      I agree with you there. But I think income tax is bogus. People work hard for their dollar and the government just takes it away from you before you get your paycheck. Why should we have to pay to work?? Most of us working people don't see our tax dollars at work in our day to day routine. We have crooked cops and pot holes in the roads. Our tax dollars should be used to better our day to day lives.

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        CA
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        Posted: February 22, 2010, 2:06 am - IP Logged

        What about tax shelters?

        If you won a huge jackpot and took the lump sum of cash, you could invest it in various things such as Real Estate, small business, etc, and wouldnt that help to shelter you?

        When I win the lottery (tsk tsk), I plan to invest a lot in Real Estate, Stocks, and becoming a pro Craps player [ :) ], so hopefully the Real Estate investments would help some.

        Is this still the case?

        You still have to pay property tax if you buy real estate.

          TheOtherOne's avatar - Lottery-027.jpg
          Nashville, TN
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          Posted: February 22, 2010, 3:59 pm - IP Logged

          You still have to pay property tax if you buy real estate.

          True, but there are probably loopholes to get around this, or at least to lessen the blow.

          For instance if you turn it into rental property, you could at least recoup some of those property taxes paid out by gaining incoming pay for your property.

          Plus, if you hold the property for more than 2 years and sell it you do not have to pay capital gains tax. This can be especially nice if the value of it rises within that 2 years (or however long you hold on to it for).

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            NY
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            Posted: February 22, 2010, 4:30 pm - IP Logged

            most of the lotteries have a clause that say even if you move within (example 5 years) of winning a major jackpot, you still owe taxes to original state on those annual payments.  then after 5 years you can claim yourself a resident of said new state.

            The  lottery runs the lottery, period. They have absolutely no authority over rules ands regualtions about taxes or residency. Since the states aren't stupid you can expect that an income that comes from a state will be taxed by that state regardless of where you live. It's the source of the income that determines which state gets first claim on the income tax, not your residence. Just as a non-resident will pay taxes to the state that pays them a lump sum, a resident who moves will continue to pay taxes to the state that the annuity payments come from.

            States will also sometimes claim that your tax domicile hasn't changed even though you may have secured, and are staying at, a residence in another state. If the state can establish that your tax domicile is still in that state, then that's the state you'll pay taxes to. "Moving" to a new house while maintaining your existing house and keeping the same bank accounts, etc, is an indication that the new house is only a temporary residence, and the old house is still your permanent residence. If you're a normal working stiff making 30 to 50k it's very unlikely that the state will claim you haven't really changed your tax domicile when you move. If you've got an income that results in a substantial tax bill and you move to a different state with lower taxes they may pursue the matter if there are indications that you're just trying to avoid the taxes. While the lottery would be one reason that your income might result ina substantial tax bill, the law is strictly a state law that has norelation to the lottery. If you really move you'll be opening new bank accounts, getting a new drivers license, etc. You may decide that owning rental or investment properties is a good idea, but you would be wise to sell your old house and buy other properties if you want to maintain properties in your old state. Better still, any property should be owned by a corporation. Even so, creating business ties to the old state is an indication that you don't really intend to sever your financial relationship with that state.

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              NY
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              Posted: February 22, 2010, 4:44 pm - IP Logged

              True, but there are probably loopholes to get around this, or at least to lessen the blow.

              For instance if you turn it into rental property, you could at least recoup some of those property taxes paid out by gaining incoming pay for your property.

              Plus, if you hold the property for more than 2 years and sell it you do not have to pay capital gains tax. This can be especially nice if the value of it rises within that 2 years (or however long you hold on to it for).

              I'm not sure what that 2nd sentence is supposed to mean, but property taxes and other costs of maintaining a rental property would be deductions that reduce the taxable income from the rent that's collected. No matter how long you own the property, you will owe some kind of income tax on any profit when you sell it, unless that income is exempted. There used to be a once-in-a-lifetime 125k exemption if you were over 55 and bought another home of equal or greater value. The rules have changed, and there is now a 250k exemption for each sale, but that is subject to some rules. If the house is your principal residence you get the exemption. For a rental or investment property you won't get the exemption.

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                Framingham,Ma
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                February 23, 2010
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                Posted: February 23, 2010, 9:36 am - IP Logged

                New to this site,so to begin saying Hi to All.There is a website that  has mm/pb drawings amounts and payouts with both federal and state taxes for each state in USA for annuity/cash buyout,which states take state taxes and which do not.MY opinion if won,would be cash buy out,example 76million this weeks powerball,in MA would get check for 25.69 after federal/state taxes.But before claiming this would get IRS for 5754 which is for players winning in a pool( you can find this on-line) each person listed gets set amount by you and pays seperate taxes on their share.You get the rest.Example 25.69, 1 brother/1 sister/ child,each recieves 1 million, 2 parents each to receive 250k ea.rest goes to me and I'm gone.You each recieve a W2G from the lottery to file your taxes paid for that year.Cheaper to do it this way than getting money and buying family members house/car/school what ever.I would put half my money into CD's in several banks and collect 3.5% and that interest would be enough to live off later on,some money would buy home in new location and better car and boat nothing new nothing super expensive,help children with medical problems and work part time at soup kitchen and just ENJOY LIFE.Just my opinion. have good day and good luck to all.

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                  CA
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                  Posted: February 23, 2010, 4:38 pm - IP Logged

                  New to this site,so to begin saying Hi to All.There is a website that  has mm/pb drawings amounts and payouts with both federal and state taxes for each state in USA for annuity/cash buyout,which states take state taxes and which do not.MY opinion if won,would be cash buy out,example 76million this weeks powerball,in MA would get check for 25.69 after federal/state taxes.But before claiming this would get IRS for 5754 which is for players winning in a pool( you can find this on-line) each person listed gets set amount by you and pays seperate taxes on their share.You get the rest.Example 25.69, 1 brother/1 sister/ child,each recieves 1 million, 2 parents each to receive 250k ea.rest goes to me and I'm gone.You each recieve a W2G from the lottery to file your taxes paid for that year.Cheaper to do it this way than getting money and buying family members house/car/school what ever.I would put half my money into CD's in several banks and collect 3.5% and that interest would be enough to live off later on,some money would buy home in new location and better car and boat nothing new nothing super expensive,help children with medical problems and work part time at soup kitchen and just ENJOY LIFE.Just my opinion. have good day and good luck to all.

                  What is this site that you speak of? That's a good idea. Never thought of that pool idea and having them pay their own taxes. Lol.

                    LadyMylena's avatar - avatar6 1.jpg
                    Kansas
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                    December 19, 2009
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                    Posted: February 23, 2010, 7:27 pm - IP Logged

                    What is this site that you speak of? That's a good idea. Never thought of that pool idea and having them pay their own taxes. Lol.

                    Yes, that is an interesting idea! I would love to see the site, too.

                    Luck is  ** believing  ** you're lucky.” ~Tennessee Williams

                    Money is neither my god nor my devil. It is a form of energy that tends to make us more of who we already are, whether it's greedy or loving.  ~ Dan Millman


                      Bagent's avatar - avatar 10424.gif
                      Vancouver, WA
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                      Posted: February 25, 2010, 4:41 am - IP Logged

                      iGlenn,

                      You are close with your figure, the highest IRS tax rate is 39.6%.  Thank God I live in a state with no state tax so I will only have to worry about the Federal.

                      I agree with your other statement totallly.  When dealing with that amount of money, why take a chance on messing it up.  Having a Tax professional and Attorney is the only way to go.

                      If I have a jackpot size amount of money, you won't see me using TurboTax.  I won't be doing any more than signing my name on the last page of the return.

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                        NY
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                        Posted: February 25, 2010, 12:15 pm - IP Logged

                        There are 6 tax brackets, which were set in 2001 and expire at the end of 2010. The highest tax bracket has been, and remains at 35%. 39.6% was the top bracket for several years prior to 2010, and at some times in the past it has been much higher than that. Rates for 2011 and beyond have not been set, but we may see a return to 39.6%.

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                          Posted: February 25, 2010, 1:44 pm - IP Logged

                          What about tax shelters?

                          If you won a huge jackpot and took the lump sum of cash, you could invest it in various things such as Real Estate, small business, etc, and wouldnt that help to shelter you?

                          When I win the lottery (tsk tsk), I plan to invest a lot in Real Estate, Stocks, and becoming a pro Craps player [ :) ], so hopefully the Real Estate investments would help some.

                          Is this still the case?

                          Yes there are ways to minimize your loss of money through strategic investments but remember what brought us to our current economic collapse.   There was a huge amount of wealth sitting in the various mutual funds and investment accounts all looking for AAA rated investment securities such that people found ways to repackage sub prime mortgage backed securities as AAA rated securities by  creating derivatives, the rating programs at the time treated each derivative as an independent risk much as each lottery draw is independent of each other but the fact is that they were all derivatives of each other so when one failed, they all started to fail.   It was the difficulty of finding good investment opportunities that lead to the crisis and when you have an entire jackpot in one year, you'll be hard pressed to make good investment choices for all of it.   As annual payments, you can take advantage of methods like dollar cost averaging and you won't have as much pressure to invest in something just for the sake of investing to avoid taxes.   If you have no choice but to make an investment decision then you know it'll be a bad one and if you take the cash value option, most of your initial investments will be bad ones.   With the large jackpots, the first payment in the annuity should be plenty to realize your dreams so why add the added complication of investing the rest in the first year?

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                            Posted: February 25, 2010, 1:51 pm - IP Logged

                            There are 6 tax brackets, which were set in 2001 and expire at the end of 2010. The highest tax bracket has been, and remains at 35%. 39.6% was the top bracket for several years prior to 2010, and at some times in the past it has been much higher than that. Rates for 2011 and beyond have not been set, but we may see a return to 39.6%.

                            When I say that taxes have traditionally been based on 50%, I'm referring to the genus of all taxation, the spice trade through the middle east where city states would seize half of a merchant's wares whenever they stopped in town to resupply.   This 50% mark is reflected in the taxation laws of virtually every country in some ways and at some point in time has been and/or will be the maximum taxation rate.   The 50% mark is most often seen in corporate taxes where they are less likely to alarm the voting public but as with all taxes, a number of exceptions and loopholes exist to keep the most effective opponents quiet.   It's these merchants who developed algebra so that they can work out how much they would have left after the various stops that they had to make. 

                            Regardless of what the highest tax bracket actually is, you pay much more of your taxes in the highest bracket if you take the cash value option then if you took the annuity where you get the discounted lower tax brackets each and every year hence a greater percentage of your income will be taxed at the lower rates.   More importantly, the annuity buys you time to arrange your circumstances to avoid future taxation.

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                              Posted: February 25, 2010, 1:59 pm - IP Logged

                              iGlenn,

                              You are close with your figure, the highest IRS tax rate is 39.6%.  Thank God I live in a state with no state tax so I will only have to worry about the Federal.

                              I agree with your other statement totallly.  When dealing with that amount of money, why take a chance on messing it up.  Having a Tax professional and Attorney is the only way to go.

                              If I have a jackpot size amount of money, you won't see me using TurboTax.  I won't be doing any more than signing my name on the last page of the return.

                              I live in a state with no state income tax as well but I'm not sure if that's a blessing.   The property taxes are inordinately high resulting in a very unfair distribution of the costs of state services.   I would be more in favour of a consumption tax like a state sales tax then either property or state income tax as even the income tax is disproportionate with whom actually consumes public resources.    People often criticize the lottery for taxing the poor yet apartment dwellers never complain about not paying school district taxes yet still sending their kids to public schools, is that really fair to property owners? especially considering the disproportionately larger families in the lower economic classes?

                              A jackpot winner can definitely afford professional advice for taxation, indeed it would be prudent to turn over even driving to a professional driver/body guard just to avoid liability.   With that much money, you're a target and a rather juicy, unprepared one at that.