Lottery Winner!
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How it all breaks down in Illinois, last year:
The 1.28 billion is only if you take it over time, but if you want it all now, you get $747.2 million.
Yet like most things, even that lower cash figure gets whittled down by the IRS. In fact, lottery winnings are taxed, with the IRS taking up to 37%. Curiously, though, only 24% is withheld and sent directly to the government. The winning cash prize of $747,200,000 after the 24% IRS withholding tax, drops to $567,872,000. But the winner shouldn’t spend all that. After all, the federal income tax rate goes up to 37%, and you can assume that the winner is in the top 37% bracket. Well, many hundreds of millions of dollars into the top tax bracket, as it turns out.
The spread between the 24% withholding tax rate and the 37% tax rate on these numbers is another whopping $97,136,000 in tax. That’s a big check to write on April 15th. Since the tax withholding rate on lottery winnings is only 24%, some lottery winners do not plan ahead, and can have trouble paying their taxes when they file their tax returns the year after they win.
That’s one reason the winner should bank some of the money to be sure they have it on April 15th. If you add the 24% withholding tax plus the 13% extra tax the winner will pay April 15th together, you get a federal tax of $276,464,000. And the cash the winner has left is $470,736,000. Then, depending on whether the winner’s state taxes lottery winnings, you may have to add state taxes too.
The ticket was purchased in Illinois, and Illinois has a 4.95% state income tax, so that lops off another about $37 million in tax. In rough numbers, assuming the winner is an Illinois resident, that should mean the winner takes home about $433.7 million. That’s huge, but it’s a far cry from being a billionaire.
"Now look here, you Baltic gas passer... " - Mik, 6/14/08
The saying, "Lite is just one damn thing after another," is a gross understatement. The damn things overlap.
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Knew a guy that won $17M after taxes. Made his life miserable for awhile.
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@Jolly said in Lottery Winner!:
Knew a guy that won $17M after taxes. Made his life miserable for awhile.
That seems to happen quite a bit. Even when you do everything the correct way as far as planning, etc.
Starts at 1:17 after the ad.
Link to video -
How it all breaks down in Illinois, last year:
The 1.28 billion is only if you take it over time, but if you want it all now, you get $747.2 million.
Yet like most things, even that lower cash figure gets whittled down by the IRS. In fact, lottery winnings are taxed, with the IRS taking up to 37%. Curiously, though, only 24% is withheld and sent directly to the government. The winning cash prize of $747,200,000 after the 24% IRS withholding tax, drops to $567,872,000. But the winner shouldn’t spend all that. After all, the federal income tax rate goes up to 37%, and you can assume that the winner is in the top 37% bracket. Well, many hundreds of millions of dollars into the top tax bracket, as it turns out.
The spread between the 24% withholding tax rate and the 37% tax rate on these numbers is another whopping $97,136,000 in tax. That’s a big check to write on April 15th. Since the tax withholding rate on lottery winnings is only 24%, some lottery winners do not plan ahead, and can have trouble paying their taxes when they file their tax returns the year after they win.
That’s one reason the winner should bank some of the money to be sure they have it on April 15th. If you add the 24% withholding tax plus the 13% extra tax the winner will pay April 15th together, you get a federal tax of $276,464,000. And the cash the winner has left is $470,736,000. Then, depending on whether the winner’s state taxes lottery winnings, you may have to add state taxes too.
The ticket was purchased in Illinois, and Illinois has a 4.95% state income tax, so that lops off another about $37 million in tax. In rough numbers, assuming the winner is an Illinois resident, that should mean the winner takes home about $433.7 million. That’s huge, but it’s a far cry from being a billionaire.
@George-K said in Lottery Winner!:
, that should mean the winner takes home about $433.7 million. That’s huge, but it’s a far cry from being a billionaire.
That’s very much like being a billionaire. Most billionaires value is not liquid, but in assets. When they sell those assets, they too will be paying that 37%. Beyond that, let’s say you blow $33.7 million on a couple of houses, cars, donations, cars, and a bunch of fun… Put the rest into frigging CDs, and live off half the interest ($10M at 5% in year 1) and reinvest the rest, you will be a billionaire in 12-15 years, while being exceedingly wealthy and living in luxury.
The Brad
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@Jon what kind of fees do you think it would cost to manage that type of money? You will want a money manager that you can trust and rely on. I would imagine an agency as opposed to an agent would be preferred, and an independent company to audit your money managers.
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@George-K said in Lottery Winner!:
, that should mean the winner takes home about $433.7 million. That’s huge, but it’s a far cry from being a billionaire.
That’s very much like being a billionaire. Most billionaires value is not liquid, but in assets. When they sell those assets, they too will be paying that 37%. Beyond that, let’s say you blow $33.7 million on a couple of houses, cars, donations, cars, and a bunch of fun… Put the rest into frigging CDs, and live off half the interest ($10M at 5% in year 1) and reinvest the rest, you will be a billionaire in 12-15 years, while being exceedingly wealthy and living in luxury.
@LuFins-Dad said in Lottery Winner!:
@George-K said in Lottery Winner!:
, that should mean the winner takes home about $433.7 million. That’s huge, but it’s a far cry from being a billionaire.
That’s very much like being a billionaire. Most billionaires value is not liquid, but in assets. When they sell those assets, they too will be paying that 37%. Beyond that, let’s say you blow $33.7 million on a couple of houses, cars, donations, cars, and a bunch of fun… Put the rest into frigging CDs, and live off half the interest ($10M at 5% in year 1) and reinvest the rest, you will be a billionaire in 12-15 years, while being exceedingly wealthy and living in luxury.
Well, first thing you do is give 10% to the church...
