wow someone just won the powerball jackpot worth 699.8 million dollars and it's the
seventh largest jackpot winning in us history and it got me thinking okay how much do lottery
winners pay in taxes because the winner definitely definitely does not take home the full amount that
is advertised during the lottery and of course a large part of the lottery winnings are immediately
withheld for taxes and you'll likely owe the rest during the next tax season and at the same time
the winner would also be bumped into a higher tax bracket which means they'll owe a larger
percentage than what they're used to paying to the irs so in this brief episode what i want to do is
break down how much taxes the recent 699.8 million dollar jackpot winner may pay in taxes stay tuned
okay let's go to get into this could you imagine winning 699 million dollars what would you do okay
would you buy a mansion would you buy a fancy car would you invest it or would you go to mars
okay but seriously what would you do now with me being an accountant i already know that the taxes
are coming so my first move would be trying to figure out the net take-home pay after taxes
before i do anything else which by the way if you do ever win a lottery i would suggest that you do
the same thing and this video should help you do just that so let's go through the estimated tax
bill for this lottery winner of 699.8 million dollars but we'll go ahead and round it up to
700 million dollars just to make the math a little bit easier to follow so the first thing number one
the lottery winner will have to decide whether or not they want to take a lump
sum amount or if they want to take an annuity so in this case the winner could opt to take
490 million dollars as a lump sum which immediately means they're giving away 200 million
dollars or the winner could take home the annuity that pays the full amount of money but over a
30-year period which means they'll basically get roughly 23.3 million dollars per year
for 30 years okay so which one would you take would you take the 496 million dollar lump sum
leaving 200 million dollars on the table or would you take the 23.3 million dollars per year i'm
super curious okay tell me in the comment section below and i'll tell you exactly what i would do
in a minute but first let's talk about the taxes so on the 496 million dollar lump sum payment you
will pay roughly 183 million dollars in federal taxes which is 496 million times the highest
federal income tax rate today which is at 37 percent but it doesn't end there because you would
also have to pay some state taxes as well now in a state like new york the lottery winner will pay
approximately an additional 45 million dollars in taxes so in this scenario if you take the lump
sum amount of 496 million dollars there will be an estimated tax payment of 228 million dollars
leaving a net brain home take home pay of 268 million dollars okay would you take it before you
answer that let's look at the taxes on the annuity but really quick before i do if you're new to our
channel hey i'm sean with life accounting the accounting company that helps you save on taxes
and build more wealth if you find this video topic to be interesting as much as i do then please do
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more people who want to learn about lottery taxes so if you decided to take the annuity payment
remember you would get the full lottery amount but over a 30 year period which would be close
to 23.3 million dollars per year and at that rate you will likely owe about 8.5 million dollars per
year in federal taxes which is 23 million times 37 percent and if you live in a state like new york
you would pay about 2 million in taxes per year leaving a net income or net take home pay
of 12.8 million dollars per year and if you add up all the taxes over a 30-year period you
would actually pay more in taxes because remember you're taking home more money which would be a 315
million dollar tax payment over 30 years so if you're following along with me then you're
starting to realize that the taxes are kind of similar and at this point you're probably thinking
that a lump sum payment is a lot more attractive okay but here's the thing okay and here's what i
would do okay i would take the annuity payment for two big reasons and i'll also give you a third one
as well so number one which is pretty obvious okay it gives you the most earning potential over the
next 30 years okay you make more money and if you are young like me then god willing you still have
some time okay and number two and more importantly i would deploy different tax strategies every year
to help reduce my taxable income and in that way i would be able to take home more money and pay
fewer taxes just like the ultra rich people do and so maybe that net 12.8 million dollars
that we talked about earlier turns into a net 20 million dollars and over 30 years i'm taking home
over 90 percent of my winnings versus a lump sum payment where you have one tax year to find
the right tax deductions and the right tax credits and the right investments i mean in one tax year
that's pretty much impossible all right so you're probably not going to have the time
to be able to put together at least carefully think about putting together a tax strategy
if you take the lump sum payment which leads me to reason number three that i would take the annuity
because having the lottery money dripped over time in an annuity payment allows me time to actually
learn how to properly manage this new wealth and learn how to smartly invest my money and there's
all kinds of stories out there of lottery winners or even big nfl and nba players who end up going
broke because they did not know how to manage their money and the truth is it really takes time
to learn how to master wealth but anyway that's just what i think okay what do you think don't
forget to tell us in the comment section below if you would take the lump sum or the annuity
now if you want to learn more about individual or business tax strategies then we have two
more videos coming up next that you should definitely check out and we'll see you over there