How much do you think Timothy Schell will have to pay out in taxes on his $50 Million Canada Lotto Max win? The amount will surprise you.
You’ll be shocked at how much of your winnings you lose to various agencies in many countries.
In the USA, taxes and a reduced prize through part payments - known as annuities - can take up to two thirds of your winnings from the advertised prizes.
In the USA, all lottery winnings are subject to Federal and some local taxes. The IRS takes a 25% withholding tax from any wins over $5,000.
For example, if you win an advertised $100,000 prize in the United States and choose a smaller lump sum payout, the lower payout, along with depreciation, withholding and personal taxes means there could be as little as $33,000 left in your pocket.
One of the main reasons for small payments is that some games show a lesser annuity payout amount in their jackpot figures. That's the total amount the winners get in instalments, and it’s taken over an extended period.
Often these are annual payouts spread over 20-29 years, making up the large jackpot totals you see in many games.
If the winner takes this cash sum, the total payout amount is reduced considerably.
For example, the $640 million Mega Millions game drawn on 30 March 2012 gave a cash lump sum payout of $474 million to the winners. And there were still taxes to pay after that.
But there are some countries where you don’t pay any tax on the win at all. These countries pay out a lump sum immediately, tax-free, to all lottery winners:
- New Zealand
- United Kingdom.
So, can you get around this barrier and claim most of the prize for yourself? Yes - move to a country with the tax-free option, or live there as Canada Lotto Max winner Tim Schell does. Or see a good lawyer.
Unfortunately there is little you can do about it, but don't let that stop you from playing!
Yes, I have the winning ticket (I have won 1st division $22,236,652.87), my son bought it for me for Father’s day along with some scratchies and sent it in a card, I emailed him my numbers about a fortnight ago. He lives in WA and purchased the ticket there. Can hardly contain myself.