If I won 1 million dollars, how much would really have....?

Question

If I won 1 million dollars, what is the percentage I'd owe in taxes both federal and state. I live in Arizona, and I am single. Can someone who knows about taxes or how I can figure this out, please give me a good estimate. Thank You =)

Answer 1

What is withheld and what you'll actually owe in taxes are two completely different things. Assuming you're a U.S. citizen playing the Arizona Lottery you will recieve $700,000 and the other 30% of the 1 million will be withheld for Federal (25%) and state (5%) income tax purposes.

http://www.arizonalottery.com/Faqs.asp?FaqId=20#ID20

If that was your ONLY income for the year you will MOST LIKELY OWE TAXES... roughly $76,887 to the IRS!!! That 25% that Arizona with holds isn't enough, and is very possible that 5% isn't enough for the state either, so you will probably owe them too. I can't tell you for sure because I'm not familiar with Arizona taxes and the type of forms and credits used.

I'll explain, and to simplify things lets assume that you are 26 years old, no children, not blind, not disabled, unemployed (and not self-employed), not in college (and never went, so no education credits and student loans), living at home (can't be claimed by parents because the lotto winnings puts your total income above the dependency limit), do not have any investments, no rental properties/royalties/residuals/jury pay, no IRA contributions, not paying or recieving alimony, that you cannot itemize, and you have no special factors and deductions that would add Alternative Minimum Tax (AMT) to your base tax liability. The new standard deduction for 2006 tax season was $5,150 for single filing status, since they just started it last year (and I haven't seen anything on the IRS site saying it has changed), it is assumed the 2007 standard deduction will be the same)

Your 1040 would look something like this...

Line 6d) 1 (Only your box checked)
Line 7 through 20) BLANK
Line 21) 1,000,000 (Gambling/Lottery income)
Line 22) 1,000,000 (Total Income)
Line 23 through 36) BLANK
Line 37 & 38) 1,000,000 (your AGI)
Line 39) BLANK
Line 40) 5,150 (assuming unchanged for 2007)
Line 41) 994,850 (Line 38 - Line 40)
Line 42) 1,100 (based on page 36 instructions for your AGI)
Line 43) 993,750 (Line 41 - Line 42 = Taxable Income)
Line 44) 326,887 (101,469.25 + [(Taxable Income – 349,700) x0.35] based on the 2007 Tax Rates)

http://www.irs.gov/formspubs/article/0,,id=164272,00.html

Line 45) BLANK (Assuming no AMT)
Line 46) 326,887 (your total Tax Liability)
Line 47 through 55) BLANK (assuming no credits)
Line 56) 0 (No credits)
Line 57) 326,887 (Line 46 - Line 56)
Line 58 through 62) BLANK (No additional Taxes)
Line 63) 326,887 (Total Tax Liability)
Line 64) 250,000 (the 25% withholdings)
Line 65 through 71) BLANK (No other payments)
Line 72) 250,000 (total withholdings & payments)
Line 73 & 75) BLANK (Line 72 is NOT larger tha Line 63)
Line 76) 76,887 (Line 63 - Line 72, this is what you OWE)


This of couse will be very different when you add in what you make from your job(s), investments, kids, adjustments to AGI, and tax credits you qaulify for, so you may owe a bit more or a bit less that the basic $76,887.

So, if you want to stay on the safe side when you win the Arizona Lottery ask them to withhold 50% of your winnings, 35% for the Federal and 15% for the state. Yes is sucks, you only get 1/2 a mil for now, but you'll have a nice cushion for tax season and it is always better to have too much withholdings than not enough. Besides, any extra withholdings that exceeds your tax liability will be given back to you as a tax refund.

Answer 2

i would give it around to my family members that may need it the most , i will also give it to all the needy children in the world to be used for there health care as well as the needs of the children as well as there family would feel good to give to someone else that would need it as much as we do we live an america and there is alot of people that dont even eat or have a place to stay as well as the children dying and that is a crying shame

Answer 3

Around $630K - still a very nice sum!

Might be about $50K more if you won it in a state lottery - many states don't charge tax on wins from their state lotteries, I'm not sure about AZ.

Answer 4

Just about 28% of it will go to taxes.

Answer 5

Are you in Mateers class? LOL

Answer 6

You would get somewhere around $750,000 in the end.

Answer 7

$650,000 - $750,000

Answer 8

you would probably come out with about $350,000/$400,000