Younger boy’s school is doing a cash prize raffle with the winner getting $50,000! Tickets are $300 each. 500 tickets total, so a 1 in 500 chance of winning $50k.
Well, that’s before taxes of course…
A $50,000 raffle win in Kentucky will be subject to both federal and state income taxes, with immediate withholding of 24% for federal taxes ($12,000) and a 4.5% Kentucky state income tax ($2,250). Total initial withholding is typically around $14,250, though you may owe more depending on your final tax bracket.
Key Takeaways for a $50,000 Win:
- Federal Tax: The IRS requires a mandatory 24% withholding for prizes over $5,000, amounting to $12,000.
- Kentucky State Tax: Kentucky taxes gambling/raffle winnings, with a rate of 4.5% (as of 2023), totaling $2,250.
- Total Initial Tax: Roughly $14,250 will be withheld up front.
- Additional Taxes:Â Since $50,000 likely pushes you into a higher tax bracket, you may owe additional federal taxes when you file your tax return.
So you take at $14,250 haircut before you get a dime AND you’ll likely be on the hook for another couple grand at the end of the tax year. So, really you’re paying $300 at a chance to win around $30,000. Which would certainly be helpful, but not as helpful as actually getting $50,000.
Whores and Ale 