Taxes on lottery winning
How do taxes on lottery winning work?
I know that when you win a large sum of money in the lottery you have to pay a large amount of taxes, sometimes it can add up to 40% of your winnings. But after paying these taxes, you put the rest of your money in the bank, do you ever have to pay taxes on the money you put in the bank ever again?
Question posted by: Dr. Answers
When you win a large sum of money in the lottery, you are typically required to pay federal and state income taxes on your winnings. The exact amount of taxes you will owe depends on a variety of factors, including the amount of your winnings and your overall income for the year.
For federal taxes, lottery winnings are considered taxable income and are subject to federal income tax at a flat rate of 24%. In addition, if you win a large jackpot, you may also be subject to an additional federal tax withholding of 24% or more. This withholding is designed to help ensure that you have enough money set aside to pay your taxes when you file your return.
State taxes on lottery winnings vary depending on where you live. Some states do not tax lottery winnings at all, while others may impose a state income tax of up to 8% or more.
Once you have paid the taxes on your lottery winnings, you are free to do what you like with the remaining money, including depositing it in the bank. However, any interest earned on the money in the bank is considered taxable income and will be subject to federal and state income taxes.
In summary, while you may not have to pay additional taxes on the money you put in the bank after winning the lottery, you will still be required to pay taxes on any interest or earnings generated from that money.