LOTTERY TAX CALCULATOR: WHAT PERCENT OF TAXES DO YOU PAY IF YOU WIN THE LOTTERY?
There's no doubt winning a lottery or being showered with a sudden windfall is as exciting as a 4-year old getting their favorite Popsicle! But that 4-year old's excitement might last longer than yours! Because as soon as you've won that huge sum of money and just started imagining your problem-free life full of luxuries, Uncle Sam steps in to take your Popsicle! You quickly learn that you have not bagged the Advertised Lottery Jackpot! Therefore, you should not be too quick in spending the prize from your grand win.
Lottery winnings are treated as ordinary taxable income by both Federal and State tax authorities.
Winnings are taxed at the same rate as wages or salaries. The total prize amount must be reported on the winner’s tax return for that particular year. Before you can even touch your newfound wealth, the IRS automatically deducts 24% of the winnings and your state can take as much as an additional 13% for the state taxes. There are few states that do not levy an individual income tax on lottery prizes including Florida, New Hampshire, Tennessee, Texas, South Dakota, Washington, and Wyoming. While there are few states like California and Delaware that do not levy any lottery taxes. https://bit.ly/3KU2R9W To understand these complicated lottery tax calculations, you need to get your hands on a lottery tax calculator and hire a financial advisor to get help over tax and investment strategies. But before that, let's familiarize you with some basic tax information on lottery prizes so that you make the most of your good fortune and handle the wealth successfully.
HOW ARE YOUR LOTTERY WINNINGS TAXED UNDER FEDERAL AND STATE LAW? Ok, so the IRS considers your lottery winnings as ordinary taxable income. There's no special tax bracket for such types of money received. After deducting the cost of your ticket, the amount left is owed to Federal Income Taxes. The exact percentage levied for the federal income tax depends on your total amount of winnings and other sources of income. This is why the IRS withholds 24%. For most winners, they will get a refund because their prize doesn't put them into a tax bracket higher than 24%. But in the case of record-setting jackpot winners, they may end up still owing additional Federal taxes. Let’s say you won a million dollars and chose to receive your lottery winnings in the form of 20 annuity payments. That would mean you would receive $50,000 in 2022. Under this situation, you would report $50,000 as income on your 2022 tax return. But, if you chose to take the lump-sum payout option, you would have to report the entire $1M amount received in 2022. And for this, you definitely need a lottery tax calculator. It is important to note that before you receive a single penny, the IRS automatically takes away 24 percent of your winnings as tax money. And you're expected to pay the rest of your tax bill on that money when you file your return.
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