I just won a prize worth $5k. Besides the tax directly on that, it would also cause SSD benefits to be taxed.?

Question

Any idea how much would be owed on the $5000 and if my SSD is about $16,500 + hubby's income is about $36k and we take standard deductions, what's the additional tax we'll have to pay on my SSD (which in most years his income is not enough to cause to be taxed--or it's minimal)---The bottom line, is it worth it to claim this prize (a trip for 2) or will our additional tax burden make it a less attractive trip for us. Thanks for your help.

Answer 1

If this is a choice as to whether or not to take the prize and pay taxes on the income or not take the prize and not pay anything....

I estimate the total federal tax differential based on your facts to be $1387.

Your other question as to how it affects your taxable Social Security...you are in the range where additional income causes more SS to be taxed. In specific, for each dollar increase in income, 85 cents additional of your SS income is taxed, so you will be taxed on about $4200 more of your SS payment.

In summary, based on your bracket, your looking at about $1387 more tax as a result of the $5000 income.

Remember: $3600 in your pocket at the end of the day is STILL BETTER than nothing!

WealthBUilder

Answer 2

Also, if you won the prize in legal gambling (let say bingo @ chruch for example), you itemize and deduct your spendings on gambling (lotto, bingo, casino, etc) up to the amount of your winnings.