[pastor1189]

The advertised prize is paid out in a 30-year annuity, but 48 of the 50 Florida Lotto winners from 2010 to 2012 took the money up-front, even though they got about a third less.(from the newspaper)

Question?
Does the government take out the taxes like a withholding tax. Or is this
Tax permanent and charged at a special rate for lottery winning. Or can you
Commingle this income with your regular income at the end income tax and maybe get something back?

[ScottGem]

Each state handles this differently. From the Fed side, this is gambling winnings and should be listed on your return as such. But it is added to your total taxable income. Depending on how much you win, it could throw all your income into the highest bracket. The feds require withholding at 28% for winnings over $600. But currently the top bracket is higher.

Some states do exempt lottery winnings from state and local income taxes, but since FL doesn't have any, it's a non issue.

If we are talking about a top prize winner, it is unlikely they would get anything back and in fact have to pay more taxes on their non lottery income. But, frankly, if you win in the tens of millions or more, are you really going to care about a few thousand more in taxes?

As to winners taking the lump sum, it is almost always better. The advertised jackpot is based on the total payout from an annuity. The state invests the cash prize in an annuity that pays an annual stipend. That's the reason why the lump sum is so much less because it represents the present value of the annuity. Usually a person can do much better investing the money on their own rather then accept the annuity return the state gets.

For example:lets take someone earning a 5 figure annual income who wins $50m after taxes. That person can probably invest just $10m and generate annual tax free income of close to $250K. That should be more enough to live on, even with more expenses. That preserves the principle and still gives then $40M to spend.

Anyone winning a mega lottery prize would be well advised to seek legal and financial advice before accepting the prize.

See: http://www.forbes.com/sites/janetnov...rball-jackpot/

[pastor1189]

Great

[Fr_Chuck]

Win that big lottery ?

You can come and visit me here and spend some of it on me if you did (LOL)

[pastor1189]

No just curious about the winners. Not me.

[AtlantaTaxExpert]

Everything ScottGem says is accurate.

Texas, which has a lottery which consistently has some of the largest prize levels due to the size of the state, even has support groups for the big winners, to give them access to the financial and tax advice they need plus to help them with the problems that result from suddenly being immensely wealthy.

[pastor1189]

Very good

[AtlantaTaxExpert]

Glad we could be of help!