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How much income tax do you have to pay on winning $10,000? |
How much income tax do you have to pay on winning $10,000? The IRS requires that 20% of your winnings be withheld at the time they are paid. Depending on your tax bracket when filing your personal return, you may owe more or less than the 20%. Source(s): IRS - CPA 23 years Not enough info..... It depends on what tax bracket your other income puts you in. A safe bet would be $2500 + state tax if applicable. It will be taxed as any other income, so your marginal tax rate will dictate the amount of tax. I agree - it does depend on your tax bracket - if you're in a top bracket you would pay close to $4000. (But hey, $6000 left is nothing to sneeze at.) there are two cases case 1: you receive 10k but did nothing to personally enter or qualify for this specific award. Example: the McArthur prize is awarded to deserving thinkers and researchers who are nominated by their peers for work they've already done. Same with Nobel Prize. this type of money is free AND you likely don't have this type case 2: the 10k is taxed like any other ordinary income you've received. Example: lottery winnings are taxed as ordinary taxable income. See next case to understand why FICA/Medicare tax does NOT attach. case 2b: some folk can make a case that they are professional gamblers -- in this limited case, their provable losses can be deducted from their winnings and only the net profits are taxable. This would be business income and is subject to both income taxes and FICA/Medicare. you likely aren't in this class either -- pros know they are gamblers and the tax reasons for having that tax status clear? MBA/CPA |
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