Taxes lottery winnings kentucky,online south africa chat,leadership course winnipeg - 2016 Feature

In the United States, the amount that one wins in a lottery is classified as 'gambling winnings' or 'earnings', and is considered as taxable income. Winners of popular lotteries, such as Mega Millions or Powerball, are photographed holding a big, symbolic check, on which the face value of the jackpot is inscribed boldly. In various states, it is mandatory for a person to specify the mode of receiving the reward before he buys lottery tickets.
If Jim chooses the first method, the amount he will receive from the lottery agency will not be $500 million. As Jim will receive this amount as a single payment, he would fall into the highest tax slab of 39.6%. If Jim happens to be a New Jersey resident, he will be further taxed by the state government. If Jim decides to share some of his winnings with his family or friends, he would need to pay 'gift tax' to the Federal Government.
The total amount of taxes Jim has paid to the government till now is a whopping $143,990,890.
So Jim, who had set his eyes on winning a $500 million jackpot, has paid $144 million to the government, and has about $100 million for himself.
Considering the same scenario, if Jim decides to receive the payment as annuity, he can look forward to receive the whole $500 million over a period of, say, 25 years. There has been a lot of debate on whether taking winnings in annuity helps in saving tax dollars. Although the chances of winning a mega jackpot for an American are as low as 1 in 175 million, awareness about the taxation policy can be beneficial for everyone. This includes the Federal tax, tax levied by the states, and in some cases, taxes levied by the cities.


However, as soon as the media proceedings are over, the winners sit down with their attorneys to know what percentage of their lottery winnings will go into the coffers of the treasury.
On the other hand, some states give the winner 60 days, so that he can consult his attorney, or family members on the mode of payment. Suppose, Jim is lucky enough to have the winning ticket for ABC Lottery, worth $500 million (face value).
As the Senate passed the tax laws on New Year's Eve, and The House of Representatives upheld it the day after, the exemption for 'gift tax' still stands at $5.12 million. Still a lot of money we would say, but if there is someone, whose odds of winning a lottery are the highest - year in and year out - it is undoubtedly, our good ol' Uncle Sam!
Most financial planners believe that for a jackpot that runs into hundreds of millions, the taxes levied are more or less the same.
Lottery folklore is rich with tales of people who ended up accumulating huge debts because of ignorance about lottery winnings taxation.
In this article, we will try to know about the taxes that the lottery winners are liable to pay to the government.
Although there have been calls for putting an end to the policy of taxing money earned in a lottery, the truth is that these taxes are here to stay as these help the government in raising revenue required for public welfare. There are two ways in which Jim can claim this amount,Jim can request to have the entire amount paid to him at one go. According to this theory, it can be assumed that the lump sum amount paid to Jim can earn the face value of the prize by a fixed-rate investment over a period of time. This is because of the fact that the annuity still puts a person in the highest tax bracket. Therefore, it is important that we know what we stand to win, or lose, before we buy a lottery ticket.


Usually, lottery agencies offer 55%-60% of the face value if the winner decides to take a lump sum. Many lotteries have progressive annual installments in place, so that the winners can offset the effect of inflation. In Jim's case, the annuity is approximately $19 million dollars, which still makes him liable to pay taxes at the rate of 39.6%.
That is, the annual payment increases by a certain amount every year to help the winner deal with inflation.
On the other hand, if a person has won a comparatively lesser amount, say $500,000, he can save tax dollars by opting to take the amount in yearly payments to prevent himself from falling in the top tax slab. The decision to opt for lump sum or annuity depends upon other factors, such as winner's age, financial health, debts, etc.
Although there have been calls for putting an end to the policy of taxing money earned in a lottery, the truth is that these taxes are here to stay as these help the government in raising revenue required for public welfare.In various states, it is mandatory for a person to specify the mode of receiving the reward before he buys lottery tickets. Still a lot of money we would say, but if there is someone, whose odds of winning a lottery are the highest - year in and year out - it is undoubtedly, our good ol' Uncle Sam!Considering the same scenario, if Jim decides to receive the payment as annuity, he can look forward to receive the whole $500 million over a period of, say, 25 years. That is, the annual payment increases by a certain amount every year to help the winner deal with inflation.There has been a lot of debate on whether taking winnings in annuity helps in saving tax dollars.



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taxes lottery winnings kentucky



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