24-year-old Wisconsin Powerball winner may lose nearly half to tax

[Teh One Who Knocks]

By Brittany De Lea | FOXBusiness




One lucky 24-year-old in Wisconsin matched all six Powerball numbers in March to win $768.4 million.

Manuel Franco came forward to claim the prize, the third-largest in history, on Tuesday.

During a press conference, Franco said he "just had that lucky feeling" when he bought the ticket on his way home from work.

"I looked at [the winning ticket] one number at a time," Franco told reporters. "I was going insane pretty much ... it was amazing, my heart started racing, blood pumping, my blood felt warm. I screamed for about five or ten minutes."

Franco added that he wants to be responsible with his winnings.

Franco opted for the lump sum and the IRS is coming for a chunk of the change.

The lump sum is valued at about $477 million. About $114.5 million will be immediately withheld in federal taxes, bringing the amount down to around $362.5 million.

The IRS will also likely tax the winnings at the highest federal income bracket, which now sits at 37 percent for individuals with incomes in excess of $500,000. The winner may owe any difference between that tax rate of 37 percent and the federal withholding rate of 24 percent when he files his tax return at the end of the year – or 13 percent. That would shave off another $62 million.

In Wisconsin, the state is expected to take a tax bite equal to 7.65 percent or the top tax rate, deducting another $36.5 million.

That brings the overall tax tab up to about $213 million. From the lump sum value of $477 million, this would mean the take home pay is around $264 million.

Winnings are not subject to the 3.8 percent net investment income tax.

If Franco plans on giving money away, under current law he is allowed to give up to $15,000 to as many people as desired without tax consequences.

Akhavan advised any lottery winners to retain an attorney to help with asset protection.

“I frequently advise my clients on the use of sophisticated trusts and other techniques to ensure maximum protection,” he said. “A financial adviser should be selected to help prudently invest these assets. We hear all too often about lotto winners whose funds are mismanaged and they end up squandering their fortune.”

[Hal-9000]

What a scam down there. We don't pay tax on lottery winnings.

Can someone explain this to me?

The jackpot is 768.4 million. He didn't choose that option. What would happen if he did? Yearly payouts at only X-amount per year?

He decides to take the lump sum instead which is 477 million and then various taxes are levied onto that, dropping the amount to 264 million.

So the lottery corporation awarded the winner about a third of the advertised amount and gave the government 213 million. Quite the process...

[PorkChopSandwiches]

[Teh One Who Knocks]

What a scam down there. We don't pay tax on lottery winnings.

Can someone explain this to me?

The jackpot is 768.4 million. He didn't choose that option. What would happen if he did? Yearly payouts at only X-amount per year?

He decides to take the lump sum instead which is 477 million and then various taxes are levied onto that, dropping the amount to 264 million.

So the lottery corporation awarded the winner about a third of the advertised amount and gave the government 213 million. Quite the process...

Yes, if you don't take the lump sum, then it becomes an annuity and you get 25 annual payouts that will in total equal the original jackpot amount.

[Teh One Who Knocks]

And you will still have to pay tax on the annuity payments, it just gets spread out over 25 years instead of one big lump sum to the Treasury Dept.

[Hal-9000]

And you will still have to pay tax on the annuity payments, it just gets spread out over 25 years instead of one big lump sum to the Treasury Dept.

Thanks Lance. I was wondering if each annuity payment would be taxed and how that system compares to taking the reduced lump sum.

Government must love the lotto corps down there.

[PorkChopSandwiches]

Also, in theory you can make much more money when properly invested taking a lump sum in the long run.

[Hal-9000]

Also, in theory you can make much more money when properly invested taking a lump sum in the long run.

They also know another part of human nature/the attraction of lump sums...

Will you be here for all 25 years to collect? Most people err on the side of - Gimme everything now so I can invest/buy what I want/hookers & blow budget setting, etc

[Hal-9000]

I'd hire a helicopter and drop needles on anti-vaxxer rallies

[Teh One Who Knocks]

Thanks Lance. I was wondering if each annuity payment would be taxed and how that system compares to taking the reduced lump sum.

Government must love the lotto corps down there.

There was a large jackpot where the winning ticket was slod in South Carolina I believe and it was getting close to the time to claim ending. The government of South Carolina came out and publicly whined that they were counting on that tax money from the winning ticket and they had already put that money into their budget.

[PorkChopSandwiches]