If you in the Power Ball Lottery and you would all your money up front, how much in persentage do they take out? And if you were to take only the curtain amount out per year what would they tax per year? What one would you be getting more of the money out of??? Use 1 Million for an example.
2007-08-10 10:13:26 · 4 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
From what I have seen from examples in the paper, the winner if they choose the lump sum option typically gets about 35% of the original jackpot. So using your example, they would get $350,000 of 1 million. And that would be then tax free since they'd have already paid the tax on their winnings. Otherwise, taking it over time, if it's paid out over 20 years (I'm not sure on the payout period), then they would get $50,000 per year before taxes, and taxes would probably be about 30% of that amount, or about 15,000, so they would get a net check of about 35,000. But then how much they would pay in actual tax would depend on their other income and deductions and exemption. They could find themself pushed up into a higher tax bracket due to the winnings. From everything I have read about it is that most people are better off taking the lump sum option, because you can invest the money that you get right away, and unless you totally blow it on an investment, you should end up with more money over the payout period than if you took it spread out. Now if you know you will just go ahead and blow the money totally, then take the paying it out over time period. You'll end up broke either way, but at least you'll spread out the blowing of the money over time, instead of blowing it all in one year.
2007-08-10 10:19:47 · answer #1 · answered by Anonymous · 0⤊ 0⤋
If you take a lump sum right away instead of the stated jackpot value, you get about 40-some percent of what you'd have gotten if you took it over 20 years. That doesn't have anything to do with taxes - that's just because the lottery has to pay out right away and doesn't have the use of some of the jackpot money for the next 20 years.
The winnings would be taxed as ordinary income at the federal level. If you took the money up front, you'd pay out about a third of it to the IRS. If you took $50K a year for 20 years instead, you'd pay more like a fourth of what you got each year.
Most states don't tax winnings on their state lotteries, so you very likely would not owe state income tax.
2007-08-10 10:22:11 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
LUMP SUM definitely! Who knows if you are going to live the 20 years of payments! I want all my money now!
2007-08-10 10:22:03 · answer #3 · answered by Kam7185 2 · 0⤊ 0⤋
take the lump sum
2007-08-10 11:45:00 · answer #4 · answered by bob P 3 · 0⤊ 0⤋