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Survivor: The after-taxes
edition
By Kay
Bell • Bankrate.com
 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.
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.
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
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