Nevertheless, if you happen to have gambling losses, you could count them against your windfall. You also would get deductions available to all itemizing tax filers, such as up to $10,000 in state and local income taxes and interest paid on up home loans up to $750,000.
You also could make a charitable cash donation of up to 60 percent (up from 50 percent pre-2018) of your adjusted gross income and carry forward, up to five years, any excess amount. Some lottery winners set up their own charitable foundation and donate a portion of their windfall to it.
“If you’re charitably inclined, it’s a great option,” Weston said.
However, she said, don’t get too carried away with sharing your wealth without some planning.
The IRS lets you give up to $15,000 to as many individuals as you want each year. Those gifts do not count as charitable contributions or come with any tax benefit to the giver, and they do not generate a tax for the recipient. So if you really wanted to, you could give $15,000 to each of your friends and the IRS wouldn’t even need to hear about it.
Amounts above that, though, count toward your lifetime estate and gift tax exclusion, which is $11.18 million per person (up from $5.49 million pre-2018 and scheduled to revert back after 2025).
That’s how much you can transfer to others, either as a gift during your life or as a bequest after your death, without having the amount subjected to the 40 percent federal estate tax. Additionally, some states have estate or gift taxes.
Given how complicated the tax system can be — coupled with the staggering amounts in the current jackpots — it’s best to enlist the help of experienced professionals to figure out your optimal tax strategies, Weston said.
“I can’t stress enough the importance of sitting down with a tax advisor,” Weston said.