Powerball winner/Lottery Taxs

[AestheticDeath]

recent winner (http://news.aol.com/article/rancher-wins-powerball/516332?icid=main|main|dl1|link3|http%3A%2F%2Fnews. aol.com%2Farticle%2Francher-wins-powerball%2F516332)

Says the powerball was not split up, and it was worth 232 million. Yet after taxs he only gets 88 million? WTF! Why show him standing with a check for 232m if he doesn't get all of that?

How much is the penny ante winnings of other people who didnt get the powerball, but not part of the winnings going to taxs? Or is there any?

How the fuck can they take that much tax? And could a winner sue the government for theft?! Or at least get them to change the law somehow.

[Bhuryn]

I think it's only the full amount if you take it over X number of year. Pretty sure up front payout is only a fraction of the total. Either way the tax shouldn't be much more then 30% I would think.

[Androidpk]

I'm pretty sure it is over 30%. I'm also pretty sure the person receiving said $88 million is not complaining.

[thefarmer]

Jackpot winners may select a cash option to receive approximately half of the advertised jackpot in cash, rather than annual payments over 29 years. This option is valid for up to 60 days after the prize is claimed.

http://www.ildado.com/powerball_payoffs.html

[Bhuryn]

In the end, it's probably still more money give PV and whatever it allows you to generate even if it's just crappy interest.

[The Ponzzz]

Yeah, gambling winnings are taxable income on your 1040. When you win a large amount, you can either split it over a longer period of time or take it instantly. Either way, you lose about 25% to federal and then a percent to state and/or local. Also, at the time of redeeming, any back debt you may have owed can and usually is instantly removed and paid back to whomever. Such as student loans, child support, back taxes... There are also lawyer fees as well, which are effing huge.

[Kranar]

In the end, it's probably still more money give PV and whatever it allows you to generate even if it's just crappy interest.


It would be significantly better to take it over the 29 years.

At 4% interest taking 8 million dollars a year, you'd have 423.73 million dollars after 29 years.

Taking the lump sum of 88 million dollars at 4% interest over 29 years only yields 274.44 million.

Same holds true up until 9% interest at which point taking the lump sum is better, but good luck getting 9% interest over 29 years.

[MrTastyHead]

You also have to factor in that it's non-transferable, though. You take the annual payments and then get cancer or eat a car four years later, poof, no more money for your family.

[diethx]

There are also lawyer fees as well, which are effing huge.

Uh, for what?


You also have to factor in that it's non-transferable, though. You take the annual payments and then get cancer or eat a car four years later, poof, no more money for your family.

You sure about that? I don't see why you wouldn't be able to leave the annuities to someone (family) in your will in case of your death. Where'd you see it was non-transferrable?

[Some Rogue]

You sure about that? I don't see why you wouldn't be able to leave the annuities to someone (family) in your will in case of your death. Where'd you see it was non-transferrable?

It depends on the state. Some are most definitely transferable to your estate.

[MrTastyHead]

Hmm. I wonder if that is something decided on a state-by-state basis. I looked at the SD website and it says they are transferable to the estate, but I've been told for the past 26 years that you couldn't in VA. Of course the VA website doesn't have that info anywhere that I can find. Now it's bothering me and I must know.

Seems the IRS mandates a 25% federal and 4% state tax on lotto winnings, plus other possible taxes. Naturally they don't mention anything about what those other taxes could be.

[Bhuryn]

capital gains probably.

[Dhuul]

The lottery was a better value for ticket buyers when the Mob ran it.

[The Ponzzz]

Uh, for what?


You need a lawyer present for the paperwork you go through. Same case when you inherit money from a relative that passes away. And it is very expensive. You don't think they just hand you the money and you are set lose with millions, did you?

[Ker_Thwap]

You can get it over 30 years, or you can get the present value of future income. Then it gets hit with about a 40% tax rate.

The average slob would be better off taking it over 30 years because they'll piss away the large chunk of one time cash, and generally have a hard time properly investing it to to get a decent return.

Either way, it's still a pretty sweet deal.

[Back]

Dude, its still 88m.

[diethx]

You need a lawyer present for the paperwork you go through. Same case when you inherit money from a relative that passes away. And it is very expensive. You don't think they just hand you the money and you are set lose with millions, did you?

Why do you need a lawyer present? You don't need a lawyer present for most paperwork that I can think of. And why would it be "effing huge" lawyer fees? It's not like if the lawyer wins a case for you and gets a percentage of your judgement/settlement.

And no, you tard. I'm well aware there'd be plenty of paperwork to go with it, not just a check and a don't spend it all in one place.

[Kranar]

And it is very expensive. You don't think they just hand you the money and you are set lose with millions, did you?


In Canada... if you win the Lottery, you literally bring your debit card, swipe it, and all the money is all yours. No taxes, no waiting over 30 years, no need for a lawyer. You walk in, swipe, take a picture holding a check for everyone to see, or you can do it anonymously, and then you're off on your own.

[Asha]

I would be too wasted on my private estate on Mars in my gold plated tux while being 30ft tall to give a fuck if they'd taken two thirds of my winnings.

[AestheticDeath]

It would be significantly better to take it over the 29 years.

At 4% interest taking 8 million dollars a year, you'd have 423.73 million dollars after 29 years.

Taking the lump sum of 88 million dollars at 4% interest over 29 years only yields 274.44 million.

Same holds true up until 9% interest at which point taking the lump sum is better, but good luck getting 9% interest over 29 years.

Are you sure? What is the math to this? (Note I'm not the math guy and didn't do any, which is why I am asking.)

I would assume the more money you start off with, the more interest you can accrue over time.

Also, according to wikipedia you don't get the money as equal payments over those 29 years.

"On November 2, 1997, the annuity period was changed from 20 to 25 years, and the cash option was added. The annuity currently consists of 30 graduated payments (increasing annually) over a period of 29 years."

"Jackpot winners have the option of receiving an annuity prize or a single lump sum cash payment. The minimum jackpot prize is a $20 million annuity disbursed in 30 payments over 29 years. When the jackpot rolls over, it increases by at least $5 million (e.g. $25 million after one roll). The lump sum payment is typically approximately half the annuity value. The 30 annuity payments are not equal but based on an increasing rate schedule. For example, the first annual gross annuity payment on the base $20 million jackpot would be approximately $267,000 while the final payment would be approximately $834,000."

[AestheticDeath]

Though other sites are showing equal payments over those years depending on the state I guess. Or the game.

But assume three ways then, lump sum, equal payments and the increasing rates.

Assume the 232m win, which would end up with more money after 29 years, assuming no money was spent?

Also, if you take the lump sum your stuck with whatever the interest rates change to. If you take it over 29 years is it the same, or do you lock in a rate to use over those 29 years?

[The Ponzzz]

Why do you need a lawyer present? You don't need a lawyer present for most paperwork that I can think of. And why would it be "effing huge" lawyer fees? It's not like if the lawyer wins a case for you and gets a percentage of your judgement/settlement.

And no, you tard. I'm well aware there'd be plenty of paperwork to go with it, not just a check and a don't spend it all in one place.

Each state is different, but in NY, if you win, you need a lawyer. Just the way it is. Just like I need a lawyer in NY for for signing the paperwork on buying a house, but in Indiana I don't.

My great aunt who has now passed away won $700k on the lotto. She lost 300k to taxes and then had to pay the lawyer 150k. It was all mandatory.

[diethx]

My great aunt who has now passed away won $700k on the lotto. She lost 300k to taxes and then had to pay the lawyer 150k. It was all mandatory.

So she paid 43% tax on her winnings? Um, isn't that a bit steep? I dunno, if you say so, but that all sounds very hard to believe. What the fuck did the lawyer do to earn him 150k?

[LMingrone]

Pretty much what everyone else has said. It really depends on the State, as they are the ones who run the lottery. Take a lump sum and you lose some of the overall payoff. Taxes and lawyers eat up a little of it.

I'd take the lump sum and get a good lawyer and a good financial adviser (Luckily I have one living with me). Not really something I think about much as I have the worst luck ever. I never win shit.

I've known two people who have won. 2 million, and 1 million. Both drank themselves into oblivion right after winning and died in their 30's. Their used to be a hilarious local TV show that was a reality show about people that won shit tons of money and are all living in trailers now.

I'd still take the risk of having 88 mil in my pocket. I'd change it into cash and carry the biggest money clip in the world. The better question.....what would you buy first if YOU won?

Me? A 2002 Lotus Espirit, lifetime Giants season tickets, a DeLorean DMC-12, as many pairs of Jordan XIs I could find, and the biggest most unnescasary house I could find.

[Trouble]

Tax brackets increase as you go up:

Wikipedia: For 2008, the Federal tax brackets for a single (unmarried) person are:

10%: from $0 to $8,025
15%: from $8,026 to $32,550
25%: from $32,551 to $78,850
28%: from $78,851 to $164,550
33%: from $164,551 to $357,700
35%: $357,701 and aboveThen add in state & local taxes, which could be another 8-10% depending on state.

[diethx]

Yeah i'd take the annuity. I'd be okay getting and living off of 8 mil a year. At least I know I wouldn't be able to piss it away too soon. Plus, it'd be kinda nice to know i'd never have to work again with such a fat yearly paycheck.

[diethx]

Tax brackets increase as you go up:

Wikipedia: For 2008, the Federal tax brackets for a single (unmarried) person are:

10%: from $0 to $8,025
15%: from $8,026 to $32,550
25%: from $32,551 to $78,850
28%: from $78,851 to $164,550
33%: from $164,551 to $357,700
35%: $357,701 and aboveThen add in state & local taxes, which could be another 8-10% depending on state.

I wasn't aware they treated lotto winnings like job income. I guess that makes sense though.

[The Ponzzz]

NY's state taxes were at 12% + whatever local she had to pay. So 25+12+local(8) for taxes. And, no clue on the lawyer. I just remember my uncle bitching about it because he felt it was increasily retarded (he is a lawyer himself in CA). This was about 7 or so years ago... Here are the current rates in NY:



The current tax withholding rates are:
Required Federal withholding 25%
Federal backup withholding 28%
Federal Non-resident Alien withholding 30%
New York State withholding 8.97%
New York City withholding 3.648%
Yonkers withholding .897%

[Daniel]

How dare the government take away a hard working man's money that he earned!

[Daniel]

I'd still take the risk of having 88 mil in my pocket. I'd change it into cash and carry the biggest money clip in the world. The better question.....what would you buy first if YOU won?


I'd pay off my mortgage and my student loans. I'd buy my mom a house and set her up a trust so she doesn't have to work unless she wants. Set up a college fund for all the children in my immediate family and friends. Put the rest in an income generating mutual fund. Go to work monday.

<shrug>

I'm a simple man.

[Trouble]

I'd pay off my mortgage and my student loans. I'd buy my mom a house and set her up a trust so she doesn't have to work unless she wants. Set up a college fund for all the children in my immediate family and friends. Put the rest in an income generating mutual fund. Go to work monday.

That's pretty much my plan except I'd probably quit my job and go back to school for at least a few years, using school breaks to do some traveling.

[Daniel]

Yea, I could see going back to school for a while. I wouldn't travel anymroe than I already do, which is a lot. So. I guess that's moot.

[The Ponzzz]

Yeah, 88mil already taxed is some serious cash. I don't think I'd quit working, but I would take the time to either get into something I really wanted to do (even if it didn't pay well) or start a good business. I really wouldn't complain if the lawyer cost me a solid % of the win.

[Senglent]

Basically the way I understand it working in IL take the jackpot (232 mill in this case for the 23 year old rancher in Texas) up front taxes hack off about 40%, Lawyer fees (have no idea what you lose to this) But the 88 he gets to keep sounds about right for IL.

One of my buddies said basically take the winning amount and you get to keep 40% (in this case my friends math works out to 92.8 mill) of it when all said and done. Wich seems about right looking at those who take the lump sum option.

I have a buddy who one 1.25 mill on the IL lotto several years ago he got 585,000 (if I am remembering right) in a check. Sadly his wife left him shortly after he won and took about half of what was left, she had a gambling problem and had already lost half of it inside 3 months.

As far as what would I do if I ever played and won......Act like I had no idea what anyone was talking about and go to work like it was any other day.

[Parkbandit]

You need a lawyer present for the paperwork you go through. Same case when you inherit money from a relative that passes away. And it is very expensive. You don't think they just hand you the money and you are set lose with millions, did you?

You don't need a lawyer present for the paperwork. Yes, they just hand you the money and you are set loose with millions.

Hiring a lawyer is completely up to you.

[Stretch]

It would be significantly better to take it over the 29 years.

At 4% interest taking 8 million dollars a year, you'd have 423.73 million dollars after 29 years.

Taking the lump sum of 88 million dollars at 4% interest over 29 years only yields 274.44 million.

Same holds true up until 9% interest at which point taking the lump sum is better, but good luck getting 9% interest over 29 years.

I'm assuming that the $88 MM is post-tax and the $8MM per year is pre-tax. If that's the case, he'll gets $5 MM each year post-tax if he chooses the payments over 29 years.

30 year annuity that gets reinvested at the same 4% doesn't sound that attractive. I'd take the lump sum.

[Tea & Strumpets]

I'm assuming that the $88 MM is post-tax and the $8MM per year is pre-tax. If that's the case, he'll gets $5 MM each year post-tax if he chooses the payments over 29 years.

30 year annuity that gets reinvested at the same 4% doesn't sound that attractive. I'd take the lump sum.

Yeah, I was figuring that anyone that knows their ass from their elbows would take the lump sum. Why would you let the state invest your money for 30 years?

[Ignot]

I think taking the lump sum or the annuity option are both good, it just depends on the person's unique situation, risk, and what their goals are with their money. I can't imagine not wanting a lawyer. A former partner of mine said the gifting rules are different for FL lotto money then regular gifting rules, so you need to set it up like each person you want to give money to chipped in on the $1 ticket. I don't know if that's true cause it sounded weird and the guy was kind of a douche. I guess I will look it up when one of my client's wins the lotto. :shrug:

[ElvenFury]

I'm pretty sure that in massachusetts there's a mandatory meeting with a financial guy before they let you go with the check (for the big lotto wins--obviously not the small-fry stuff).

[Trouble]

I think taking the lump sum or the annuity option are both good, it just depends on the person's unique situation, risk, and what their goals are with their money. I can't imagine not wanting a lawyer. A former partner of mine said the gifting rules are different for FL lotto money then regular gifting rules, so you need to set it up like each person you want to give money to chipped in on the $1 ticket. I don't know if that's true cause it sounded weird and the guy was kind of a douche. I guess I will look it up when one of my client's wins the lotto. :shrug:

What are the reasons for wanting a lawyer? The main ones I can think of are a) if you're married; b) if you want to try and protect yourself so that someone doesn't pusposely trip and fall in your place to bone you; and c) to update your will. Oh and once you get settled you may want to set up trusts for your/your siblings kids...

...but none of this should be multi-millions worth of fees, right?

[ElanthianSiren]

As far as what would I do if I ever played and won......Act like I had no idea what anyone was talking about and go to work like it was any other day.

I'd invest low yield with a lot of it, put the rest in a fund, and work. I'd probably use some to cover any extra maternity leave I wanted to take (read female BS) if necessary. My parents are both still alive as well, so I'd like to help them travel.

After that though -- living below the interest, so as not to erode the principle would be a goal of mine.

[Kranar]

Are you sure? What is the math to this? (Note I'm not the math guy and didn't do any, which is why I am asking.)



cash_per_year = 8
yearly_interest = 0.04
compound_per_year = 12
growth_rate = (1 + yearly_interest / compound_per_year) ** compound_per_year

long_term_total_cash = 0
lump_sum_total_cash = 88

for current_year in range(29):
long_term_total_cash = long_term_total_cash * growth_rate + cash_per_year
lump_sum_total_cash = lump_sum_total_cash * growth_rate

print long_term_total_cash
print lump_sum_total_cash


It's not until interest is roughly 0.09 that the lump_sum_total_cash exceeds the long_term_total_cash. You can fiddle with the parameters, higher interest, fewer compoundings per year, etc etc... However you slice it though, taking the cash over 30 years is almost always the better choice. Not to mention there are other mathematical reasons for why you should not invest 88 million dollars in one shot, especially when that's your total net worth, and should prefer to invest gradually over a long period of time, but that's going to take a lot more than just some computer code to explain. For starters... imagine you won the 88 million dollars last August and invested it... you're screwed. Whereas if you invest in a gradual manner, you're going to be in a much better position to hold your ground against the recessions, and the great recessions you'll experience over the next 29 years.

I mean for one, there's a huge difference between 420 million, and 270 million. And second, what do you need the money so badly for that you need 88 million dollars today and now as opposed to taking like 8 million dollars today and now and being almost twice as rich 30 years later? Forget about blowing it on a nice house, or a nice car or wanting to live a Mike Tysonesque life style... that's what losers who piss away all their cash do.

Think about starting like a research facility or getting involved in solving world issues. Rather than spend that money in one shot on yourself, use that money to physically build something useful and creative that no one else can build and show it off to the world. That's what money like that ought to be spent on.

[Parkbandit]

Yeah, I was figuring that anyone that knows their ass from their elbows would take the lump sum. Why would you let the state invest your money for 30 years?

Doesn't everyone currently do that with Social Security?

[Parkbandit]

I'm pretty sure that in massachusetts there's a mandatory meeting with a financial guy before they let you go with the check (for the big lotto wins--obviously not the small-fry stuff).

Pretty sure that they can't mandate who you speak with prior to claiming your prize anymore than they can mandate that you hire an attorney to claim money.

http://www.masslottery.com/about/claims.html says nothing about either scenario being claimed in this thread.

[Parkbandit]

cash_per_year = 8
yearly_interest = 0.04
compound_per_year = 12
growth_rate = (1 + yearly_interest / compound_per_year) ** compound_per_year

long_term_total_cash = 0
lump_sum_total_cash = 88

for current_year in range(29):
long_term_total_cash = long_term_total_cash * growth_rate + cash_per_year
lump_sum_total_cash = lump_sum_total_cash * growth_rate

print long_term_total_cash
print lump_sum_total_cash


It's not until interest is roughly 0.09 that the lump_sum_total_cash exceeds the long_term_total_cash. You can fiddle with the parameters, higher interest, fewer compoundings per year, etc etc... However you slice it though, taking the cash over 30 years is almost always the better choice. Not to mention there are other mathematical reasons for why you should not invest 88 million dollars in one shot, especially when that's your total net worth, and should prefer to invest gradually over a long period of time, but that's going to take a lot more than just some computer code to explain. For starters... imagine you won the 88 million dollars last August and invested it... you're screwed. Whereas if you invest in a gradual manner, you're going to be in a much better position to hold your ground against the recessions, and the great recessions you'll experience over the next 29 years.

I mean for one, there's a huge difference between 420 million, and 270 million. And second, what do you need the money so badly for that you need 88 million dollars today and now as opposed to taking like 8 million dollars today and now and being almost twice as rich 30 years later? Forget about blowing it on a nice house, or a nice car or wanting to live a Mike Tysonesque life style... that's what losers who piss away all their cash do.

Think about starting like a research facility or getting involved in solving world issues. Rather than spend that money in one shot on yourself, use that money to physically build something useful and creative that no one else can build and show it off to the world. That's what money like that ought to be spent on.

I would immediately take a one lump sum. All "math" aside, who knows if a state run lottery will be around in 30 years? Who knows if you will be around in 30 years?

If you are a person who's never been able to live within your means and have never been very good with money, you should take the payments.

[Kranar]

It's irrelevant whether you're someone who can live within your means or not.

Taking the money over 29 years doesn't mean you're stuck spending only 14 million a year. You could blow all your winnings in the first year and just be in debt for the next 28 years paying off a massive 200+ million dollar loan backed by your lottery winnings.

If you're irresponsible, like many lottery winners are, you're going to be screwed regardless whether you take the lump sum or take it over 29 years.

Really when you think of it, the only question is can you make more of the 88 million dollars by taking it immediately and using it, than you could by making 430 million dollars over 29 years. If you plan to buy a nice house, and car, for you, your family, your best friend, or in other words plan on spending that cash living a sweet and comfortable life style, then sure, take the 88 million.

How much value do you assign having 88 million dollars here and now, over having 430 million dollars over 29 years. If you value it more than you do 150 million dollars, then yeah, take the lump sum and enjoy it. I mean there are legit things to consider like inflation, like the small chance the state lottery busts within 15 years, or you might die in 15 years, those are all legit factors to consider.

[Stretch]

cash_per_year = 8
yearly_interest = 0.04
compound_per_year = 12
growth_rate = (1 + yearly_interest / compound_per_year) ** compound_per_year

long_term_total_cash = 0
lump_sum_total_cash = 88

for current_year in range(29):
long_term_total_cash = long_term_total_cash * growth_rate + cash_per_year
lump_sum_total_cash = lump_sum_total_cash * growth_rate

print long_term_total_cash
print lump_sum_total_cash




d00d, you're comparing pretax to post tax.

[Kranar]

d00d, you're comparing pretax to post tax.


Even if you compare pretax to pretax (assuming the lump sum is 125 million pretax), it's still better to take it over 29 years.

[radamanthys]

The big problem (risk) in taking the money would be inflation. Unless the government decides to default on their loans or raise taxes to ~70%, we will be facing inflation within the next few years. The combined cost of the bailouts and the Iraq war (as well as some others) will be a major contributing factor.

It might behoove someone to take the 88 and invest it in something with more liquidity. At least you'd have some options, then, instead of being stuck with a reduced-value annuity and no means (save for JG Wentworth) to withdraw.

[Parkbandit]

It's irrelevant whether you're someone who can live within your means or not.

How do you figure that? If someone has a history of being bad with money, then taking the lump sum is asking for an MC Hammer II to happen.


Taking the money over 29 years doesn't mean you're stuck spending only 14 million a year. You could blow all your winnings in the first year and just be in debt for the next 28 years paying off a massive 200+ million dollar loan backed by your lottery winnings. If you're irresponsible, like many lottery winners are, you're going to be screwed regardless whether you take the lump sum or take it over 29 years

True, but you are more apt to say "Holy shit.. I have spent 14 million dollars a year for the past 20 years.. maybe I should save some of the money for the next few years so I'm not broke as a joke after this ride is over" than you are if you take the lump sum. You have 29 years to use your brain, rather than having to find your brain in 1 year.


Really when you think of it, the only question is can you make more of the 88 million dollars by taking it immediately and using it, than you could by making 430 million dollars over 29 years. If you plan to buy a nice house, and car, for you, your family, your best friend, or in other words plan on spending that cash living a sweet and comfortable life style, then sure, take the 88 million.

Lotteries generally purchase Tbills or some other very stable investment with the lump sum and that is what they pay you off with over the 30 years.. plus they make an extra million or so on the side. There is nothing stopping you from making the same type investment.



How much value do you assign having 88 million dollars here and now, over having 430 million dollars over 29 years. If you value it more than you do 150 million dollars, then yeah, take the lump sum and enjoy it. I mean there are legit things to consider like inflation, like the small chance the state lottery busts within 15 years, or you might die in 15 years, those are all legit factors to consider.

I think hoping everything is perfect in the world for the next 30 years is a much bigger gamble than grabbing the sure thing.