We’ve heard a lot of enormous numbers thrown about lately when it comes to lottery jackpots. There’s been $1.6 billion. How about $620 million? They’re mind-blowing and life-changing numbers.
They’re also extremely taxable. While California doesn’t tax lottery winnings, the federal government does, and you can expect the bill to be a hefty one.
But when you’ve just won $1.6 billion, who needs to worry about taxes, right? There’s plenty to go around, isn’t there?
Should you win a jackpot of $1.6 billion and choose to get the money immediately in a lump sum, that knocks the winnings down to $904 million. Add on top of that an immediate 24 percent federal tax withholding. Then, you’ll owe more, up to 37 percent in all, if your income falls into a higher tax bracket.
That money will go fast because of taxes, though.
There are ways to cut down the tax bills, however. There’s a charitable cash donation that you can spread over a number of years. Or you might even form a charitable foundation.
But before you spend a penny of your earnings, it would be wise to call in the assistance of an attorney who understands the tax law and a financial adviser. A team of professionals behind you can assist you with charitable gifts, gifts to friends and other ways you might spend, share or pass on your money. The laws are so complex that you will need help to keep your money safe from the tax collector and help to safeguard it to pass on to your family.
Even if you don’t become a billionaire overnight, it’s wise to work with an attorney experienced in tax laws to make sure you’ve considered all the ways to save money, from estate taxes to gift taxes.