Mega Millions, Powerball jackpots come with big tax bite

Wealth


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.

More from Personal Finance:
The 10 most expensive U.S. tourist destinations
People in this state are at the highest risk for identity theft
The best time to book holiday travel is right now

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.



Source link

Products You May Like

Articles You May Like

Here’s how to overcome poor retirement planning
David Tepper’s Appaloosa discloses new position in Apple
ABC Entertainment president steps down; head of original programming steps in
Women believe 70 is the new 50
Maxine Waters wants terror finance panel to oversee foreign banks: Report

Leave a Reply

Your email address will not be published. Required fields are marked *