Hitting the lotto, how can they tax so much?
January 30th, 2010 | by admin |
VA brotha asked:
That 23 year old in S. Dakota that hit the lotto for 234 million dollars and choose the lump sum and got 88.5 million. My question is, how do you get taxed 146 million dollars of your 234 million. Your paying almost twice as much in taxes are you are actually getting.
Mark
That 23 year old in S. Dakota that hit the lotto for 234 million dollars and choose the lump sum and got 88.5 million. My question is, how do you get taxed 146 million dollars of your 234 million. Your paying almost twice as much in taxes are you are actually getting.
Mark
6 Responses to “Hitting the lotto, how can they tax so much?”
By jwenting on Feb 2, 2010 | Reply
Mark
State taxes, federal taxes, local taxes, handling fees, bribes, etc. etc. etc.
He was smart to choose the money. Had he chosen goods he’d have to pay that same amount in cash before he got them.
By bostonianinmo on Feb 3, 2010 | Reply
Jose
He’s not being taxed $146 million. He chose the lump sum payout instead of the annuity. The $234 million is based upon a 20 year annuity. IF you take the lump sum option, you get the present value of the annuity which is typically around half of the long-term payout. Then deduct 25% withheld for Federal income taxes and you have the $88.5 million.
BTW, the 25% withheld for tax is not going to be enough. He’ll need to make an immediate estimated payment of another 10% of the gross payout to avoid penalties and interest for underpayment of estimated taxes at filing time.
By Mathew on Feb 7, 2010 | Reply
Brenda
First of all his winnings were reduced because he took a lump sum. The 234 million reflects taking the winnings over a long period of time. The IRS takes a little less than 35%. South Dakota does not have state income tax so I don’t know if the state where the lotto is runs does.
By Steve D on Feb 7, 2010 | Reply
Andrew
First, that is not all taxes. Much of that is the difference between the annuity payout and the lump sum. Most likely,, taking the lump sum versus the annuity cost the winner about $95 million off the top, bringing teh winnings down to about $140 million. Then, 1/3 of that was taxed (about $50 million) leaving the $86 million. The $140 million would certainly put the winner in the 28% or higher tax bracket, plus some social security and of course local and state taxes.
The big deduction however, is the lump sum option.
By Chuckie O on Feb 8, 2010 | Reply
Adam
First, it isn’t all taxes. He won 234 million, but they count it in a funny way. The state buys (or self funds) an annuity that will pay 234 million in what? 20 or 30 years, and you can buy those things for a lot less. That’s where most of the “money” went.
The Federal will take their taxes, which may be as much as, but will probably be a bit less than, 35%.
He gets a break; S. Dakota doesn’t have a state income tax.
By Max Hoopla on Feb 11, 2010 | Reply
Erik
He can take the $234 million over many years or take a lump sum of $88.5 that, with interest at today’s market percentage would produce the same result. It is his choice. Income tax would be charged at regular rates for the amount he receives.