Dumb Questions Thread

[TheCracker]

It always bugged me how they say you are getting x amount of money if you win the lottery. I really wish they truly advertised how much you would actually get after taxes, since you are not getting as much as is listed.

There's a difference between UK lottery winning and US lottery winnings. We don't get taxed on lottery or any gambling winnings, but if any of that money is gifted to friends and family (but not charities) then they are eligible to pay taxes on it - which was Liquid's question in the first place.

In the US you do pay tax on lottery winnings, but i'm unsure of at what point or at what rate that happens. Or even if its the same from state to state.

 

[Joey D]

There's a difference between UK lottery winning and US lottery winnings. We don't get taxed on lottery or any gambling winnings, but if any of that money is gifted to friends and family (but not charities) then they are eligible to pay taxes on it - which was Liquid's question in the first place.

In the US you do pay tax on lottery winnings, but i'm unsure of at what point or at what rate that happens. Or even if its the same from state to state.

Both state and federal take taxes right upfront and then you might have to pay more when you file your taxes depending on how much you won. A decent ballpark is that you lose about 40% of what you win to taxes. The state tax rate will vary state to state though. You also loose a big chunk of your opt to take the payout at once instead of over 20 years.

 

[Blitz24]

There's a difference between UK lottery winning and US lottery winnings. We don't get taxed on lottery or any gambling winnings, but if any of that money is gifted to friends and family (but not charities) then they are eligible to pay taxes on it - which was Liquid's question in the first place.

In the US you do pay tax on lottery winnings, but i'm unsure of at what point or at what rate that happens. Or even if its the same from state to state.

It differs depending on state. Still, each state shows an advertisement so they can put in minimal effort to explain it.

 

[Pupik]

In the US you do pay tax on lottery winnings, but i'm unsure of at what point or at what rate that happens. Or even if its the same from state to state.

Typically, any winnings $600 and over is taxable. Then I recall it's 25% of that, plus whatever new tax bracket you're vaulted into (if any change).

My mother actually hit 5 out of 6 numbers a few years back; basically the tax was automatically-deducted out, leaving her enough to make some house payments and cover the bills for a few months. The pre-tax winnings were less than half the price of the cheapest new car a decade ago.

So if you win $20 at the horse track or $50 from a lottery ticket, you don't have to report it on your taxes, unless all of one's yearly cumulative winnings exceed $600. So if you somehow go on nominal monthly winning streaks at casinos, you're supposed to report that as well.

 

[Blitz24]

Typically, any winnings $600 and over is taxable. Then I recall it's 25% of that, plus whatever new tax bracket you're vaulted into (if any change).

My mother actually hit 5 out of 6 numbers a few years back; basically the tax was automatically-deducted out, leaving her enough to make some house payments and cover the bills for a few months. The pre-tax winnings were less than half the price of the cheapest new car a decade ago.

So if you win $20 at the horse track or $50 from a lottery ticket, you don't have to report it on your taxes, unless all of one's yearly cumulative winnings exceed $600. So if you somehow go on nominal monthly winning streaks at casinos, you're supposed to report that as well.

I know this is silly, but if all of the winnings immediately are deposited into an IRA or 401K (somehow), would one be able to just kick the can down the road as a capital gains tax provided no dividends are paid?

 

[Liquid]

opt to take the payout at once instead of over 20 years.

I didn't know that this was an option in the US. Given that lottery wins aren't taxed in the UK, I assumed all lotteries were lump sum payouts.

 

[Pupik]

I know this is silly, but if all of the winnings immediately are deposited into an IRA or 401K (somehow), would one be able to just kick the can down the road as a capital gains tax provided no dividends are paid?

I don't about this, honestly. I do know she had to visit a regional lottery office in Florida, where they filled out a form and that closed the loop.

I didn't know that this was an option in the US. Given that lottery wins aren't taxed in the UK, I assumed all lotteries were lump sum payouts.

Even more wild; if you change your mind, you have to get a lawyer involved; naturally, they also get a cut. Usually because (1) lottery winner suddenly ran into debt due to financial mismanagement (2) lottery winner realized they will not survive the payout terms of 10-30 years, and wants to place it in an inheritance. In the latter case, if you die before the payout term ends, there's a possibility the payments are non-transferrable.

 

[Shaun]

Interestingly enough down here in the land of tax we don't pay any if gifted money or by the means of a gambling win. We do however pay a tax on the purchase of a lottery ticket (I think around 10 cents) which means what you win is yours without any extra tax coming out.

 

[Meythia]

after taxes

As far as my limited understanding of the US goes, is there anything where taxes are included at all?
I mean simply going shopping doesnt seem like it at all.

 

[Joey D]

As far as my limited understanding of the US goes, is there anything where taxes are included at all?
I mean simply going shopping doesnt seem like it at all.

No, but the reason for not having tax on the price is that every place has different taxes. Some cities have taxes while others don't, just like some states have taxes while others don't, and those that do all have different percentages. That's why you see video games advertised at $59.99 + tax. The tax is going to be different depending on where you buy the game. For example, I live in Michigan where most things have a 6% sales tax, but things like groceries, prescription drugs, and feminine hygiene products are tax-exempt. When I lived in Utah, the only thing tax-exempt was prescription drugs.

The same goes for buying a car. The manufacturer sets the MSRP for the vehicle, but tax, title, and licensing fees all vary wildly between states.

 

[opelgt1969]

As far as my limited understanding of the US goes, is there anything where taxes are included at all?
I mean simply going shopping doesnt seem like it at all.

Yes when you buy gas tax is included in the price on signs. A local Drive-In Theater sells all their food items tax included. They do this so they don't have to mess with change rather than selling a Hot Dog for 2 dollars plus tax they sell it for 2 dollars total. Vending Machines have tax included in price. Some states don't charge tax on food items.

 

[Meythia]

Yes when you buy gas tax is included in the price on signs. A local Drive-In Theater sells all their food items tax included. They do this so they don't have to mess with change rather than selling a Hot Dog for 2 dollars plus tax they sell it for 2 dollars total. Vending Machines have tax included in price. Some states don't charge tax on food items.

Selling something with a beatifully fully rounded price is not the same as including tax.
In many countries everything is sold with tax, and you always see the .99 or .95 price ending still.
So what the shops you mentioned do is straightforward change the price to suit them better (and I would agree, I dont care if it 1cent or 90c that I pay extra per visit if it meant no one needs to count and handle the change).

 

[Pupik]

You can go to Delaware, Montana, and Oregon* if you don't want that pesky sales tax. But yeah, there's all sorts of exceptions that vary from place to place. For example, in Alabama; I pay full sales tax on all food, clothing, and drinks. But there's no sales tax on medicine, motor oil, labor, nor pesticides. And for automotive vehicle sales, it's only 2%, which is less than the typical state-and-local tax percentage. There's entire passages in our state Constitution on those matters.

In several states, there's no sales taxes on clothing up to a certain sale amount. Groceries vary on the type of necessity of that item (fresh produce = no taxes, soda/pop = yes). Others charge impact fees in certain "shopping districts", passing an infrastructure burden onto the consumer for transparency purposes. It varies quite a bit.

Why not sell everything with sales taxes and fees included? After all, those taxes/fee totals are merely "collected", and 100% of it must be paid back to whatever agency. So my guess is that it's probably just simpler accounting and auditing purposes.

Which is still kind of archaic, since few places charge flat prices and only the simplest of businesses are still hand-writing all documented cash transactions (artists and craft vendors come to mind).

* depends, some businesses can charge a thin 0.49% corporation tax