From a tax perspective, why is the California Powerball winner better off than the other two winners?
The Powerball craze has come and gone. Billions of tickets were sold across the country to folks hoping to win big and change their lives. With a record-breaking jackpot of $1.6 billion, it seems that everyone was tempted to purchase at least one of the tickets for a stake in the drawing.
The odds of winning the lottery prize were beyond that of getting struck by lightning at 1 in 292 Million. Changes in the game made in 2012 reduced the odds from a previously miniscule 1 in 175 Million. Jackpots have doubled since the price the ticket went from $1 to $2 in the same year. But, three lucky winners had the winning numbers 4-8-19-27-34 and the Powerball 10. The trio will share in the immense jackpot. The winners hailed from Tennessee, Florida and the great State of California.
While these winnings mean a new beginning for all of the winners, it seems that the winner from California is in a great position financially. This is because the State of California does not count lottery winning as taxable income, even though the state is known for high taxes in other areas. Pursuant to the California State Lottery Act of 1984, California is one of only three states that still work this way. This means that the California winner will not have to give up almost half of the winnings for state income taxes. If you receive a windfall of any kind, it is imperative that you understand the tax implications in play. It is always a good idea to retain an experienced tax attorney when in this situation.
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