There’s been a lot of hype and excitement over the growing Powerball jackpot, currently at 1.5 billion with a cash payout $930 million. From Facebook to Instagram to Twitter, the internet has been flooded with everyone’s dream vision of what they plan to do if they are the big winner. These lottery fantasies have ranged from extremely extravagant ideas of relocating to private islands to very subtle actions of not telling anyone and continuing to lead a normal life. I bet there are even more interesting ideas coming up every second.
But notice: the biggest thing almost everyone mentions in these fantastic fantasies is what they plan to do…. after taxes.
Let’s be real, taxes are a way of life and winning the lottery would bring about a large tax bill instantaneously, if you aren’t properly advised. Before any of the $930 million is paid out, a whopping 39.6 percent (the highest federal income tax rate for individuals) will immediately be withheld from the winnings and remitted to the IRS, along with whatever the state rate relevant to the winnings of the winner’s home state. Over half of the winnings would potentially be devoured by taxes…immediately.
I’m sure you’re thinking: Well that blows!!! And you’re right, it does. But it doesn’t have to. There is always a legal and legitimate way to minimize your tax liability, even when winning millions in the lottery.
The first thing I would suggest to anyone coming into a windfall of money, especially in winning the lottery would be to hire a qualified tax advisor. A good tax advisor who will help you:
- Create the most advantageous structure to accept your winnings for both legal and tax purposes
- Minimize the tax impact of your winnings and pay the least amount of tax legally and help you to recover amounts withheld
- Properly protect your assets from future legal and tax implications
It’s that simple! It’s not rocket science, just plain old-fashioned advice… from a tax professional! If you want to keep more of your money and limit your tax bill – leave it to the experts and hire a professional to help you make sense of it!
Don’t have a professional? Ask Ms. Tax!