What's the best tax option for lottery winners; lump sum or payments?
Which option would save you more money overall?
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Tax Professional Answers
Randy Tarpey
Payments over time is typically the most efficient tax option for a lottery winner. The progressive US income tax charges a much higher tax rate on higher one time incomes. For example tax on a lum sum reaching the highest tax bracket would be at 39.6% versus if the payments stayed in the 15% tax bracket over many tax years there would be a substantial savings. The annual winnings would allow annual deductions for gambling as well versus a lump sum which would only allow one year of deductible gambling losses. Each individual situation is different but in most cases payments will be the most tax efficient and best choice.
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379 weeks ago