How are you taxed when you win the lottery?
I know 28% must be withheld from your winnings for federal income tax purposes, but are you also subject to an additional 39% for being in the millionaire tax bracket? The way I understand it is that the 28% counts towards you 39% tax bracket so you would only need to pay an additional 11%…. Someone explain please.
@tro Can you go into more depth? What am I looking at here a 39% tax for the year or a 67% tax?

 

Comments

  • you are not taxed separately on the winnings
    it is included in your gross income, it might increase your total which will increase your tax rate but it is not dealt with separately

  • No, it’s not 67%.

    It’s closer to 33% for federal taxes. The highest tax rate is 35%. since only 28% was withheld, the winner would have to come up with the other 5% when the filed.

    State is another issue.

  • Are you just curious or you already won the lotto? If you have not won, don’t worry about it. Chances are you will not win. But if you already won, the winning is tax as ordinary income. I personally would not care about the tax if I win millions. No matter how much tax you pay, you are still a winner.

  • The winning amount that you get in the year will be added to all of your other gross worldwide income on your 1040 federal income tax return and then the taxable amount form page 2 line 43 taxable income $$$$$$ amount will be subject to your marginal tax rate up to the maximum 35% rate for the 2010 tax year when you file it in the year 2011.
    You will get a credit for the 28% amount of the federal income that was withheld by the payer of the winnings on page 2 line 62 Federal income tax withheld W-2 and 1099 $$$$$ amount.
    And of course you may also have some state income taxes to pay on the winnings amount.
    Go to the http://www.irs.gov website and use the search box for 1040ES go to page 8 to find your tax bracket amounts for your filing status.

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