Posted on 01/28/2016 11:55:14 AM PST by MichCapCon
If you win the Powerball in Michigan, don’t be surprised to discover some "partners" sharing the pot with you: state and federal tax collectors. Here’s how much they will scoop off the top in taxes, as calculated by Joe Henchman, vice president of legal and state projects at the Tax Foundation.
The winner will have 25 percent withheld automatically by law for federal taxes and the state withholding tax. In Michigan, the state income tax rate is 4.25 percent.
When the winner files their taxes next year, they would have to pay again — the difference between what was withheld and what they owe.
The current jackpot is $1.5 billion (and not split between multiple winners), with the lump-sum option paying out $930 million. So off the bat, the federal government will take $232 million through withholding, and Michigan will take $40 million.
The winner would get a check for $658 million, but come tax time next year, will owe another $136 million to Washington. That leaves $522 million in true take-home money after all the taxes are paid, or about 34.8 percent of the headline-grabbing $1.5 billion.
Also, Henchman notes that if anyone wants to share their lottery winnings with friends or family, anything over $14,000 in one year or $5.45 million over a lifetime is taxed at the gift tax rate of 40 percent.
We dumped tea into Boston Harbor over a much small tax bite than that.
(Yes, yes, I know the tea tax had already been repealed by 1773. Relax.)
Quite frankly why not have Powerball available in all 50 states?
While i was in Australia last month they had a very good multi territory lotto.
Www.tatts.com
Tatts Lotto, several lottos per week, and a Set For Life drawing.
I I thought that was the logo for gay love at first...
It would suck to go through life as a Henchman. Only a little better than a Lackey.
Lottery winnings are exempt from State taxes in MI?
Anyone even remotely familiar with finance knows you don’t “give” money to anyone, you route it through perfectly legal tax avoidance schemes like corporations and trusts.
WHAT HAPPENS IF AN ANNUITY PRIZE WINNER DIES?
The estate will handle the lottery prize. A lottery annuity prize is just like any other asset. You can pass any remaining annuity payments on to your heirs or to anyone else. The Powerball game will even cash out an annuity prize for an estate. This may make it easier for the estate to distribute the prize. It also may be necessary to cash out the annuity to pay Federal estate taxes. We will sell some or all of the securities at competitive bid or will even just transfer the securities to the estate. We do not charge a fee of any kind. We often hear people complain that the jackpot should not go back to “the state” when a winner dies. It does not. I think that this misunderstanding may come from the response that the prize “goes to the Estate” and some people hear “goes to the State.”
http://www.powerball.com/pb_contact.asp
I stand corrected. I’d always heard different, it might have been that way back in the beginning until someone bitched about it. And rightfully so.
Shows you how much I know about the game. I didn’t even know tickets had gone up to two bucks each until this last giant jackpot when I decided to throw a few bucks into the kitty.
Thanks.
The million dollar winner on America’s Got Talent gets $25,000 a year for 40 years.
is there a minimum payment if you select the liefetime annuity?
I mean if you seledct that and then then die the next year, is that all you get? (or your family)
Read my post at #27
My grandmother always tilde....a birdin the hands worth 2 in the bush
FWIW, during all the hoorah over the recent big prize, I read something about the fact the 30 annual payments are not equal.
Apparently the payout amount increases 5% per year to account for inflation.
Hah sorry. I tried typing that with one hand. Try it again.
My grandma always told me.....a bird in the hand is worth 2 in the bush.
Nice, but lump sum would be better.
If you had (after tax) 1,000,000.00 and put it in tax free munis, AAA rated, insured 3.5% coupon at par, non call, 40 year maturity, you would get $35,000.00 a year tax free.
THat is ALOT more than $25,000.00 the "annuity" gives you.
After 40 years of tax free coupon payments, you make $1,400,000.00. If you spent NOTHING, and just compounded the coupon payments and then the 1mm bond matured, you would have $2.4mm tax free.
Anyone who choses to take the annuity is an idiot. If they don't get to make that choice, I would cross my fingers that the insurance company is still around and/or honors its agreement in the next 40 years.
If I won any lottery, I would take the lump sum and invest it myself and not rely on a promise from a .gov or company's future promise. Just look at IL and CA issuing "IOUs" to lottery annuitants.
The disclaimer at the end of the episodes make no mention of, that I recall, of a lump sum alternative. I would not be surprised if the winners of a lot of “contests” be they “kick the football through the uprights at halftime” type or “find the one in ten million soda can or potato chip bag” type are forced to take money doled out over a long time.
Good thing ‘cuz I was imagining your gamma’s 2-hands in the bush...
ewwww!
The CNBC folks had a half hour special the day of the Powerball drawing. They recommended getting a lump sum. They assumed one winner. Even with taxes removed and “toys” bought a great deal of money is still left over. For just one person 800,000,000-1,000,000,000 is a lot of money. The one “toy” they recommended was a jet.
Previous winners also said a tough skin was needed. The ability to say “no” is vital. No likes to say no and no one wants to hear “no”, but it is necessary to keep the money.
That’s the idea. The government double dips on your family if you don’t claim they have an upfront claim on your ticket.
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