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Ask Wayne Brasch Your Own Question
Wayne Brasch
Wayne Brasch, Accountant and Business Consultant
Category: Tax
Satisfied Customers: 1298
Experience:  Master of Science in Taxation. Tax experience since 1963.
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How much tax do i pay from a $1,100,000 casino slot winning ...

Customer Question

How much tax do i pay from a $1,100,000 casino slot winning in California after prepaying state tax?
Submitted: 10 years ago.
Category: Tax
Expert:  Wayne Brasch replied 10 years ago.
Normally the casino would have withheld up to 30% Federal tax on the winnings before you got the money. If they didn't, you just add that income to your other income on your tax return for 2006. That will probably put you into the highest personal income tax bracket which is 35%.
Customer: replied 10 years ago.
Reply to Wayne Brasch's Post: The jackpot amount was $2,514,619 . The casino offered a lump sum of $1,107,000 which we accepted. We also prepaid $100,000 for state taxes in January. So according to your answer, I should only pay approximately $287,450 for Federal taxes in April. Does this sound correct?
Expert:  Wayne Brasch replied 10 years ago.
Plus penalties probably for not making estimated tax payments to IRS when you won the money in October. An estimated tax payment should have been made on or before January 15, 2007 for those winnings since Federal taxes were not withheld as I assume from what you have been asking.
Customer: replied 10 years ago.
So the effective tax rate is 9% to state and 32% to Federal?? Im kind of confused. Do i qualify for any deductions?
Expert:  Wayne Brasch replied 10 years ago.
On your Federal return you can claim the taxes you paid to the State on these winnings. Any other deductions depends on whether you paid any mortgage interest, real estate taxes, taxes on your car, medical expenses, and contributions. Since you won at gambling, you can deduct your gambling losses for the year up to the amount of your winnings.