Lottery officials are required to withhold 24 percent of big lottery wins for federal taxes. And that’s only the start of what the winner will fork over to Uncle Sam.
“That withholding is nowhere near enough,” said Ed Slott, a CPA and founder of Ed Slott & Co. in Rockville Centre, New York. “You’d have to set aside a lot for taxes.”
Winners get to choose whether to take their money as an annuity over three decades or as an immediate payment. Most choose the upfront cash, which for this jackpot is $161.7 million.
The 24 percent federal withholding would reduce that cash option by $38.8 million to $122.9 million. However, because the top federal tax rate of 37 percent applies to income above about $510,000 for single tax filers ($612,000 for married couples filing jointly) the winner can count on owing more — a lot more.
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