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BrokenChaos
Level 1

Question on Lottery and Taxes

Let me preface this with the following: I have NOT won any lottery yet in any way shape or form, nothing really big or moderately small (and I cry myself to sleep everytime I lose ;_;), this is a question regarding winning the lottery and how it would change how I do taxes (this will have what if's), and I am a New Mexico resident

Let's say I take my chances at the lottery, and the prize amount (if I win) is in the $400+ million range, now I know that ill have a certain percentage taxed before I receive my winning, but with how much is left over, ill most likely still be able to live under my means, not spending too outrageously or recklessly, but as nominal I can do it. But then tax season happens and then I have to mark down my winnings in the proper turbotax form. If I do this, will I see any of my winnings taxed further, and if so, how much (percentage wise) would be taxed away, or would none of it be taxed away excluding what was taxed initially by the lottery board or whatever organization for fees and somesuch

I never really thought about this as a kid, and only think about this now because I remember that story (far as I remember, was a legit article) about a non-u.s lottery winner who had all her winnings taxed away, she raised a fuss, got compensation money, but all of that compensation money was taxed away as well and she earned ultimately nothing. I'm just worried if ill run into a situation like that, and would like assurance if that fear is truly unfounded

1 Best answer

Accepted Solutions
Mike9241
Level 15

Question on Lottery and Taxes

why don't you wait until you win and then post your question. by that time the tax laws could be substantially different, so any info given today could be substantially incorrect except the part about not using Turbotax if you win $400M

 

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5 Replies
xmasbaby0
Level 15

Question on Lottery and Taxes

If you win over $400 million, you are not going to prepare your own tax return using TurboTax.   You are going to hire an excellent tax professional and a financial advisor to help you plan how to deal with all that money,  So don't let your worries about what to do with the millions disturb your beauty sleep.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Critter-3
Level 15

Question on Lottery and Taxes

Ok ... if you ever with any money they will  WITHHOLD taxes  before cutting you a check for the balance won  just like they do with a paycheck.   The withholding  is only an estimate of what you will owe on the return.   When you complete the actual return then all your income is added together, deductions are applied  and when the advance tax payments are taken into consideration you will  have a balance due, a refund or breakeven.  

mesquitebean
Level 15

Question on Lottery and Taxes

You would have been better off to have won the $400 million during the last 2-3 years.   The tax rates on that amount are likely to go up significantly this year and in the next 3 years.   And there is even continued clucking about adding a "wealth tax" on top of it, which is being floated around among the usual suspects in Congress.

 

BTW, many lotteries offer a large-award winner the choice of either a lump sum or annual payments.   One would have to do the math and get professional tax and legal advice to see which is the better option.

Mike9241
Level 15

Question on Lottery and Taxes

why don't you wait until you win and then post your question. by that time the tax laws could be substantially different, so any info given today could be substantially incorrect except the part about not using Turbotax if you win $400M

 

BrokenChaos
Level 1

Question on Lottery and Taxes

I should've, you're right. in the end, all I was looking for was an idea of what to expect rather than an answer that'll be invalid after a certain amount of time.
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