won $1 BILLION in lottery
wow, apparently it's only the 2nd highest score - didn't know that
the winner's lump sum cash option is $739.6 million............................................incredible
https://www.cnn.com/2021/01/23/us/mega-millions-winner-michigan-trnd/index.html
Quote: lilredrooster.............................
wow, apparently it's only the 2nd highest score - didn't know that
the winner's lump sum cash option is $739.6 million............................................incredible
https://www.cnn.com/2021/01/23/us/mega-millions-winner-michigan-trnd/index.html
Will Dawg claim he won and Moma Belly defend?
Quote: terapinedWill Dawg claim he won and Moma Belly defend?
Come on, MDawg doesn't need the money so he didn't even play it. Instead of spending $1 on a lottery ticket he probably put that $1 into Tesla.
Quote: lilredrooster.............................
wow, apparently it's only the 2nd highest score - didn't know that
the winner's lump sum cash option is $739.6 million............................................incredible
https://www.cnn.com/2021/01/23/us/mega-millions-winner-michigan-trnd/index.html
That's pre-tax so figure $400 million.
I've read about this lottery in Spain where the numbers are all sold regionally so when one resident hits the grads prize, everyone in his town that plays also wins.
I'd have more interest in a lottery that made a thousand people millionaires than one that makes a single person a billionaire.
Quote: billryanThat's pre-tax so figure $400 million.
I've read about this lottery in Spain where the numbers are all sold regionally so when one resident hits the grads prize, everyone in his town that plays also wins.
I'd have more interest in a lottery that made a thousand people millionaires than one that makes a single person a billionaire.
My mother’s ex husband won close to 2 million ona slot machine in AC and since he lives in pa he apparently had to pay two states taxes from what I have hear which could be incorrect he ended up with like 800k or 9 I’m not sure tbh
The lottery is paid out over many years, or you have the option to take a fixed sum. Either way, you are going to pay a lot of taxes.
I believe it also pushes all your other income into the highest tax bracket.
Quote: billryanThat depends on if it a two million dollar cash prize or if it was paid out over twenty years or so.
The lottery is paid out over many years, or you have the option to take a fixed sum. Either way, you are going to pay a lot of taxes.
I believe it also pushes all your other income into the highest tax bracket.
That last sentence is incorrect. Each tax bracket has a cap. This confused a lot of people when the Federal tax system was changed to have only two brackets (15% and 28%); people at the bottom part of the 28% bracket were afraid they would end up with less money than if they were at the top part of the 15% bracket. You only pay a particular bracket's percentage on the amount where it exceeds the next lower bracket's cap.
For example, Federal taxes for filing single are currently:
10% on the first $9875
12% on the next $30,250 (up to $40,125)
22% on the next $45,400 (up to $85,525)
24% on the next $77,775 (up to $163,300)
32% on the next $44,050 (up to $207,350)
35% on the next $311,050 (up to $518,400)
37% on anything above $518,400
If you made $100,000, you would pay $18,079.50,
However, if you made another $2 million, then you would pay $704,427 $741,427 total, which is about 33.5% 35.3% overall. You would not have to pay 37% on the entire $2.1 million.
It may seem like the entire amount is pushed into the top bracket because, in most cases, the amount in the lower brackets is small compared to the rest.
For example, if the $1 billion MegaMillions winner takes the annual payment option, the first payment is $11.57 million. Assuming a pre-lottery taxable income of $100,000 and a joint return, the total Federal tax on the first year is $4,255,049, or 36.46%,
state tax can be rough also, with Illinois at the highest with 14.96%........................quite a few states are over 10% - this includes the local or county tax
the link shows the various tax rates of different states
https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416
*
Quote: ThatDonGuyThat last sentence is incorrect. Each tax bracket has a cap. This confused a lot of people when the Federal tax system was changed to have only two brackets (15% and 28%); people at the bottom part of the 28% bracket were afraid they would end up with less money than if they were at the top part of the 15% bracket. You only pay a particular bracket's percentage on the amount where it exceeds the next lower bracket's cap.
For example, Federal taxes for filing single are currently:
10% on the first $9875
12% on the next $30,250 (up to $40,125)
22% on the next $45,400 (up to $85,525)
24% on the next $77,775 (up to $163,300)
32% on the next $44,050 (up to $207,350)
35% on the next $311,050 (up to $518,400)
37% on anything above $518,400
If you made $100,000, you would pay $18,079.50,
However, if you made another $2 million, then you would pay $704,427 total, which is about 33.5% overall. You would not have to pay 37% on the entire $2.1 million.
It may seem like the entire amount is pushed into the top bracket because, in most cases, the amount in the lower brackets is small compared to the rest.
For example, if the $1 billion MegaMillions winner takes the annual payment option, the first payment is $11.57 million. Assuming a pre-lottery taxable income of $100,000 and a joint return, the total Federal tax on the first year is $4,255,049, or 36.46%,
Perhaps I am wrong, but I look at it like this.
If I get two million from lottery, I am paying $704,427., according to your figures. Now, after a year or two, I'm bored and return to work.
Those lower tax rates were already built into my taxes so any income I make above that is taxed at 37%, no?
Quote: billryanPerhaps I am wrong, but I look at it like this.
If I get two million from lottery, I am paying $704,427., according to your figures. Now, after a year or two, I'm bored and return to work.
Those lower tax rates were already built into my taxes so any income I make above that is taxed at 37%, no?
Keep in mind that, if you stop working and no longer get that "other" $100,000, then $100,000 of your $2 million is now taxed at about 18.08% rather than 37%, but yes, if you returned to work, whatever you now made would be taxed at 37%.
Slight correction to my earlier numbers: $704,427 is the tax on $2 million; the tax on $2.1 million is $741,427.
Quote: billryanThat depends on if it a two million dollar cash prize or if it was paid out over twenty years or so.
The lottery is paid out over many years, or you have the option to take a fixed sum. Either way, you are going to pay a lot of taxes.
I believe it also pushes all your other income into the highest tax bracket.
Not only are the Powerball and MegaMillions paid over 30 years, but they factor in a 5% increase each year. So your first payment is tiny in the grand scheme of things.
I plotted out the payments over thirty years and solved for the interest rate that gets you to the advertised cash value option. By taking the annual payments you are essentially locking into a horrible 1.75% annual interest rate for 30 years.
Quote: rsactuaryNot only are the Powerball and MegaMillions paid over 30 years, but they factor in a 5% increase each year. So your first payment is tiny in the grand scheme of things.
I plotted out the payments over thirty years and solved for the interest rate that gets you to the advertised cash value option. By taking the annual payments you are essentially locking into a horrible 1.75% annual interest rate for 30 years.
Wow. Are there any tax advantages to spreading it out? One obvious advantage is not being able to blow it all the first couple of years.
Years ago, a neighbor won a million dollars which came out to be about $39,000 after taxes. He bought three new cars and had to sell one the next year for taxes. All in all he was pretty disappointed. A year or so later, the wife of a Doctor won 3 million and rather rudely complained that her $90,000 a year was chump change.
Quote: rsactuaryNot only are the Powerball and MegaMillions paid over 30 years, but they factor in a 5% increase each year. So your first payment is tiny in the grand scheme of things.
I plotted out the payments over thirty years and solved for the interest rate that gets you to the advertised cash value option. By taking the annual payments you are essentially locking into a horrible 1.75% annual interest rate for 30 years.
For those of you wishing to play at home:
Let P be the lump sum payout, M the initial annual payout, and I the "interest multiplier" (e.g. if the annual interest rate is 2%, the remaining amount is multiplied by 1.02 each year, so I = 1.02)
Assume you are paid M immediately, 1.05 M one year from now, 1.05^2 M two years from now, and so on, with the final payment being 1.05^29 M 29 years from now.
After payment 1, the remaining balance is P - M.
After payment 2, the remaining balance is (P - M) I - 1.05 M.
After payment 3, the remaining balance is ((P - M) I - 1.05 M) I - 1.05^2 M = (P - M) I^2 - 1.05 M I - 1.05^2 M.
After payment 4, the remaining balance is ((P - M) I^2 - 1.05 M I - 1.05^2 M) I - 1.05^2 M = (P - M) I^3 - 1.05 M I^2 - 1.05^2 M I - 1.05^3 M.
...
After payment 30, the remaining balance is (P - M) I^29 - 1.05 M I^28 - 1.05^2 M I^27 - 1.05^3 M I^26 - ... - 1.05^27 M I - 1.05^28 M
= (P - M) I^29 - 1.05 M (I^28 + 1.05 I^27 + 1.05^2 I^26 + ... + 1.05^27 I + 1.05^28)
Note that, after payment 30, this equals zero.
Math lesson: a^(n-1) + a(n-2) b + a^(n-3) b^2 + ... + a^2 b^(n-3) + a b^(n-2) + b^(n-1) = (a^n - b^n) / (a - b)
0 = (P - M) I^29 - 1.05 M (I^29 - 1.05^29) / (I - 1.05)
(P - M) I^29 = 1.05 M (I^29 - 1.05^29) / (I - 1.05)
(P - M) (I - 1.05) I^29 = 1.05 M (I^29 - 1.05^29)
(P - M) I^30 - 1.05 (P - M) I^29 = 1.05 M I^29 - 1.05^30
(P - M) I^30 - 1.05 P I^29 + 1.05 M I^29 - 1.05 M I^29 + 1.05^30 = 0
(P - M) I^30 - 1.05 P I^29 + 1.05^30 = 0
We are given P = 739.6 million. How do we determine M?
Easy: let Q be the jackpot
Q = M + 1.05 M + 1.05^2 M + ... + 1.05^29 M = M (1.05^30 - 1) / (1.05 - 1) = M * 20 * (1.05^30 - 1)
M = Q / (20 * (1.05^30 - 1))
In this case, Q is 1 billion, so M = 15,051,435.08
The hard part is calculating I - there is no equivalent to the quadratic equation for any polynomial with degree 5 or higher; an approximation must be used.
I will use the Newton-Raphson Method. The easiest way to describe it is, (a) draw the function on a graph, (b) select an initial guess X, (c) draw a tangent to the graph at X, (d) replace X with where the tangent crosses the X-axis of the graph, (e) repeat (c) and (d) until you come to a solution.
In calculus, x is replaced by f(x) / (df(x)/dx).
Here, x is I; f(x) = (P - M) I^30 - 1.05 P I^29 + 1.05^30, and df(x)/dx = 30 (P - M) I^29 - 1.05 * 29 P I^28.
Using P = 739,600,000 and M = 15,015,435.08, and a little help from Excel, I get I = 1.017453, or 1.7453% per year.
The million dollar winner paid 96.1% in tax then owed more ?Quote: billryanWow. Are there any tax advantages to spreading it out? One obvious advantage is not being able to blow it all the first couple of years.
Years ago, a neighbor won a million dollars which came out to be about $39,000 after taxes. He bought three new cars and had to sell one the next year for taxes. All in all he was pretty disappointed. A year or so later, the wife of a Doctor won 3 million and rather rudely complained that her $90,000 a year was chump change.
I'm guessing that was the annual payment, not the lump sum net after taxes?Quote: Ace2The million dollar winner paid 96.1% in tax then owed more ?
I wish that I were lucky enough and stupid enough to win a lottery jackpot. Sadly, our UK tax authorities don't tax them. Not one penny. $:o)Quote: rsactuaryI'm guessing that was the annual payment, not the lump sum net after taxes?
Yes, you’ve reminded us of that several times.Quote: OnceDearSadly, our UK tax authorities don't tax them. Not one penny. $:o)
The USA is unique since it essentially taxes its citizens on everything...even if they live abroad. And some of the taxes, like capital gains tax, aren’t sensible.
However, I would bet that the average American pays less overall tax than the average Brit (or French, German, Swede etc). And we pay no ~20% VAT on anything
Note that if the lump sum is always the value which, when invested at 1%, reaches the jackpot after 30 years, then the calculated interest rate is the same regardless of the jackpot amount.
Let P be the lump sum payout, M the initial annual payout, and I the "interest multiplier" (e.g. if the annual interest rate is 2%, the remaining amount is multiplied by 1.02 each year, so I = 1.02)
Assume you are paid M immediately, 1.05 M one year from now, 1.05^2 M two years from now, and so on, with the final payment being 1.05^29 M 29 years from now.
After payment 1, the remaining balance is P - M.
After payment 2, the remaining balance is (P - M) I - 1.05 M.
After payment 3, the remaining balance is ((P - M) I - 1.05 M) I - 1.05^2 M = (P - M) I^2 - 1.05 M I - 1.05^2 M.
After payment 4, the remaining balance is ((P - M) I^2 - 1.05 M I - 1.05^2 M) I - 1.05^2 M = (P - M) I^3 - 1.05 M I^2 - 1.05^2 M I - 1.05^3 M.
...
After payment 30, the remaining balance is (P - M) I^29 - 1.05 M I^28 - 1.05^2 M I^27 - 1.05^3 M I^26 - ... - 1.05^27 M I - 1.05^28 M
= (P - M) I^29 - 1.05 M (I^28 + 1.05 I^27 + 1.05^2 I^26 + ... + 1.05^27 I + 1.05^28)
Note that, after payment 30, this equals zero.
Math lesson: a^(n-1) + a(n-2) b + a^(n-3) b^2 + ... + a^2 b^(n-3) + a b^(n-2) + b^(n-1) = (a^n - b^n) / (a - b)
0 = (P - M) I^29 - 1.05 M (I^29 - 1.05^29) / (I - 1.05)
(P - M) I^29 = 1.05 M (I^29 - 1.05^29) / (I - 1.05)
(P - M) (I - 1.05) I^29 = 1.05 M (I^29 - 1.05^29)
(P - M) I^30 - 1.05 (P - M) I^29 = 1.05 M I^29 - 1.05^30 P
(P - M) I^30 - 1.05 P I^29 + 1.05 M I^29 - 1.05 M I^29 + 1.05^30 P = 0
(P - M) I^30 - 1.05 P I^29 + 1.05^30 P = 0
We are given P = 739.6 million. How do we determine M?
Easy: let Q be the jackpot
Q = M + 1.05 M + 1.05^2 M + ... + 1.05^29 M = M (1.05^30 - 1) / (1.05 - 1) = M * 20 * (1.05^30 - 1)
M = Q / (20 * (1.05^30 - 1))
In this case, Q is 1 billion, so M = 15,051,435.08
The hard part is calculating I - there is no equivalent to the quadratic equation for any polynomial with degree 5 or higher; an approximation must be used.
I will use the Newton-Raphson Method. The easiest way to describe it is, (a) draw the function on a graph, (b) select an initial guess X, (c) draw a tangent to the graph at X, (d) replace X with where the tangent crosses the X-axis of the graph, (e) repeat (c) and (d) until you come to a solution.
In calculus, x is replaced by f(x) / (df(x)/dx).
Here, x is I; f(x) = (P - M) I^30 - 1.05 P I^29 + 1.05^30 P, and df(x)/dx = 30 (P - M) I^29 - 1.05 * 29 P I^28.
Using P = 739,600,000 and M = 15,051,435.08, and a little help from Excel, I get I = 1.017453, or 1.7453% per year.
Quote: DRichCould the winner just relocate before claiming the jackpot? Let's say that the lottery offered one year to claim the prize. If I won in February could I move from New Work to Florida and set up residency. File my taxes in Florida in January, and then claim my lottery ticket in February now that I live in Florida. Would that avoid the New York state taxes?
Without checking, I’m guessing lotteries have taken countermeasures to get their tax money for common avoidance measures. Uncommon ones, always a chance they’re not covered.
Quote: DRichCould the winner just relocate before claiming the jackpot? Let's say that the lottery offered one year to claim the prize. If I won in February could I move from New Work to Florida and set up residency. File my taxes in Florida in January, and then claim my lottery ticket in February now that I live in Florida. Would that avoid the New York state taxes?
I believe there is an industry which caters to protecting lottery wins from the government. And I think the answer is yes.
The bigger question is who do you want to say owned the ticket? If I say it is solely my wife and mine, that sets up huge inheritance taxes when we kick the bucket. If we say we owned 5% and our grandkids (we actually don't have any, but theoretical..) owned 95% that eliminates lots of the possible inheritance tax issues. Exactly how you split the ticket is an expensive lawyer tactic.
Some sort of family trust would be a good option, although I imagine there are man more. The lengths some rich people go to to save on taxes is truly disgusting.
Quote: billryanI'm thinking not. NY State would argue you were a resident when you won, and you delayed cashing it in for the precise purpose of avoiding the NY taxes. If you worked and lived in NY when you bought the ticket, NY will want it's share. I'm sure there are some legal maneuvers that will save you some, but I think you are stuck paying some taxes. Not twenty years worth, but not nothing.
Some sort of family trust would be a good option, although I imagine there are man more. The lengths some rich people go to to save on taxes is truly disgusting.
You may be right. You may be wrong. I'm not going to put in the effort to find out. I would substitute the word "intelligent" for the word "disgusting", however. You don't think it is disgusting for one state to not be able to run itself without taking the income of it's residents, while other states have no problems doing so?
Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming are states with no income taxes.
(new Hampshire and Tennessee do tax investment income).
I think I'm nearing a suspension so I will leave it there.
Quote: SOOPOOYou may be right. You may be wrong. I'm not going to put in the effort to find out. I would substitute the word "intelligent" for the word "disgusting", however. You don't think it is disgusting for one state to not be able to run itself without taking the income of it's residents, while other states have no problems doing so?
Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming are states with no income taxes.
(new Hampshire and Tennessee do tax investment income).
I think I'm nearing a suspension so I will leave it there.
I'd wager that each of those states gets more from the Federal Government than they send it. Give the states back whatever they send and see how quickly the tax situation changes in every state.
I have no problem with people trying to reduce their taxes but some of the tax breaks available to the rich are obscene. They are written for and cater only to the uber-rich.
Quote: billryan
I have no problem with people trying to reduce their taxes but some of the tax breaks available to the rich are obscene. They are written for and cater only to the uber-rich.
the idea behind that is that the wealthy will invest and create businesses which in turn create jobs
if they get p***** o** because of taxes they're likely to sit on the sidelines with their cash
the old "trickle down" theory
at least that's the idea behind it
whether it actually works out that way often enough is another question - and I don't have the answer to it
surely though, there are a great many wealthy people who crave not just wealth but recognition
and they can't get recognition by sitting on their cash - they need to act
*
Quote: SOOPOOAlaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming are states with no income taxes.
(new Hampshire and Tennessee do tax investment income).
Well that wasn't well thought out. States get it one way or another. For example, as a resident of Texas, I have to pay the highest property taxes in the country.
Quote: rsactuaryWell that wasn't well thought out. States get it one way or another. For example, as a resident of Texas, I have to pay the highest property taxes in the country.
Alaska has its oil revenue.
