A CPA’s advice for California’s Powerball winner: ‘Don’t answer the phone’
Lottery fans celebrate at the Chino Hills 7-Eleven store where one of the winning tickets in the $1.5-billion Powerball drawing was sold.
When the owners of three winning tickets lay claim to their share of a $1.5-billion Powerball jackpot, a fourth party will also get a slice — the federal government.
Federal taxes immediately skim 25% from the top of grand prize winnings. Depending on where you live, state taxes may also take a cut.
Fortunately enough for Californians, the Golden State does not demand income tax from lottery winnings. But that doesn’t mean the state won’t take a cut when you start earning interest on that money.
“Once the winners start having earnings off their winnings, of course that will be taxed,†said Brooke Salvini, a CPA and personal financial specialist in San Luis Obispo.
Any income generated through investments will also get taxed, she said.
In California, the top tax rate for individuals is upward of 12%, according to the Franchise Tax Board. On the federal level, it’s 39.3%, which is where the lottery winners will find themselves, Salvini said.
“When you’re in that top tax bracket, your personal exemptions start to phase out, your itemized deducations start to phase out,†she said.
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Also, lottery winners in California don’t have the option of remaining anonymous. Once the winner is verified by the state, lottery officials reveal the winner’s name in a press release.
This newfound notoriety thrust on big winners can cause unique problems, Salvini said.
“Most important, don’t answer the phone. Everyone and their brother will be calling asking for money,†Salvini said.
While the holder of California’s winning ticket has yet to be identified, the owner of the store where it was sold — a 7-Eleven in Chino Hills — is basking in lottery glory.
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On Thursday morning, convenience store owner Balbir Atwal spent the morning granting interviews to reporters and greeting happy customers.
“Everybody’s come here to support us,†he said, grinning.
A sign that read “Millionaire made here†had been hung behind the register.
Cashier Rea Paras said people had been buying lottery tickets all morning.
“It’s just crazy,†she said. “They say, ‘This is the lucky store.’ â€
Chino Hills Mayor Art Bennett swirled among the crowd.
“I’m just here sharing the story of how proud and thrilled we are that this happened in our community,†he said.
Bennett watched on TV on Wednesday night as a crowd of people rushed the store after the name of the shop was announced.
“That’s the funny thing,†he said. “The people out celebrating weren’t the winners. They were the losers. But they were still thrilled that something like this happened in our community.â€
For breaking California news, follow @JosephSerna.
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