topic Taxes on lottery winnings (taxed before or after payout amount)? in Get your taxes done using TurboTax

Taxes on lottery winnings (taxed before or after payout amount)?

bsantos2489 — Tue, 05 Jan 2021 05:00:12 GMT

I was wondering if someone wins a prize lets say $100,000. If you look at the tax brackets you are at 24% tax rate. However, I noticed lottery tickets explain a payout after the prize such as Powerball, in fine print of 50% payout. So, that will make the $100,000 to $50,000 after the payout which puts you in a different tax bracket of 22% instead. My question is are you taxed on the original prize ($100,000) or at after the payout amount ($50,000) because if you are then you are at a lower tax bracket at 22% keeping more money. This is all hypothetical of course if that is only your income for the year. Thanks

Re: Taxes on lottery winnings (taxed before or after payout amount)?

xmasbaby0 — Tue, 05 Jan 2021 05:12:19 GMT

The total amount you won is taxable. They estimate an amount to withhold -- just like your employer withholds some tax from your paycheck. When you enter the W-2G into your tax return you enter the amount you won and the amount of tax that was withheld. Then the calculations begin and you find out if they withheld enough, too much, or if you owe more.

And the way tax brackets work is that only the amount above the tax bracket limit is taxed at the higher rate. It is not all taxed at the higher rate.

Gambling winnings are taxable income. Losses are an itemized deduction. If you do not have enough itemized deductions to exceed your standard deduction, your losses will have no effect.

https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/

https://ttlc.intuit.com/questions/1900352-can-i-deduct-my-gambling-losses

2020 Standard Deduction Amounts

Single $12,400 (+ $1650 65 or older)

Married Filing Separate $12,400 (+ $1300 if 65 or older)

Married Filing Jointly $24,800 (+ $1300 for each spouse 65 or older)

Head of Household $18,650 (+ $1650 for 65 or older

Re: Taxes on lottery winnings (taxed before or after payout amount)?

ee-ea — Tue, 05 Jan 2021 05:31:36 GMT

Taxes are based on the money you get in hand in any tax year. A 100K prize paid at 10K per year, it is taxed for 10 years on 10K. If that 100K was paid as one 50K payment the winner would include only 50K in one return.