“You’re in a completely different position with that kind of money,” Chancey said. “You can build your own financial services team that is dedicated all day to your financial affairs.”
For both Bailey and West, minimizing taxes likely will factor prominently in their financial decisions. While both winners had taxes withheld from their share, it doesn’t mean the amount accurately reflects what will be due at tax time.
The federal withholding rate on lottery wins is 24 percent, although both winners will face the top rate of 37 percent — plus state taxes of 8.82 percent in New York and 8.98 percent in Iowa (8.53 percent as of 2019). Bailey also faces local taxation of 3.88 percent due to residing in New York City.
Depending on a variety of factors — including how the winners choose to spend, invest or give away through charitable causes — the final tax bill could me more or less.
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One of the ways to reduce the amount forked over in taxes is to set up a charitable foundation. Basically, the government gives you a tax break if you use private money to do public good.
West, the Iowa winner, already announced plans to start a foundation and to donate $500,000 to a group that serves wounded veterans. Bailey said he would “give back to Manhattan” without providing details.
Meanwhile, the holder of the $1.5 billion Mega Millions jackpot has yet to come forward. The winning ticket — which hit all numbers in the Oct. 23 drawing — was purchased in Simpsonville, South Carolina. Lottery winners in that state have180 days (about six months) from the drawing to claim their prize, so the winner (or winners) has until April 21 to come forward.