- advertisement -

Survivor: The after-taxes edition

You survived tropical insects, bad food and back-stabbing tribe mates to win that $1 million. But don't go spending it just yet.

There's no immunity reward to get you past the Internal Revenue Service. And it's going to be a lot harder for the ultimate "Survivor" to outwit, outlast or outplay Uncle Sam and his state brethren.

First, the feds are going to take their part. Even with the new lower rates, that's going to be a big bite, around $359,000.

See Also
How to survive a $1 million jackpot
QUIZ: Would riches ruin you? Find out now.
How do millionaires stash their cash?

Then there's the matter of state taxes. Forty-one states collect income taxes and yes, other jurisdictions follow the IRS lead in considering prize winnings as income. Depending on the winner's legal residency, that could be a potentially sizeable payment.

A winner from New York City needs to set aside almost $68,000 to pay the tax collector in Albany. But it doesn't end there. The Big Apple collects its own tax: another $36,000 or so is earmarked for city hall. That's a total of $104,000 going to various Empire State collectors.

The picture isn't any rosier if the winner is from the west:

  • A Californian would owe the state around $91,000.

  • If you're trading that island hut for a Honolulu condo, get ready to hand over $82,000 or so.

  • And Montana isn't called the Treasure State for nothing; a prize winner from there would have to come up with about $107,000.
- advertisement -

Suddenly, that $1 million has dwindled. It's down to $537,000 for the New Yorker; $550,000 for the Golden State resident; $559,000 for the Aloha State inhabitant; and just $534,000 for the Montanan.

Maximizing money by moving
OK, that's still a lot of money, especially for just a few weeks' work. But a change of domicile could improve the Survivor's post-tax take.

If the game show millionaire lives in Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, there's no state income tax due. Of course, there's more than one way to get money into a state treasury. In these cases, it's through sales taxes collected when the cash is spent back home.

Sales taxes could definitely put a damper on the prize winner's spending spree. Combined state and local tax rates could be as much as 8.8 percent in some Washington locales. Florida follows with an 8.5 percent maximum, and the Lone Star state is close behind at 8.25 percent.

A Survivor from New Hampshire or Tennessee also gets a bit of an immediate tax break. In these two states, only interest and dividend income is taxed, so no tax bill is due until the winner's wisely invested prize money starts paying returns.

-- Posted: May 20, 2002

top of page

30 yr fixed mtg 3.94%
48 month new car loan 2.94%
1 yr CD 0.72%

Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?

Begin with personal finance fundamentals:
Auto Loans
Credit Cards
Debt Consolidation
Home Equity
Student Loans

Ask the experts  
Frugal $ense contest  
Form Letters

- advertisement -
- advertisement -