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How does taxes work

how does taxes work


Yes, you are subject to the tax rules where you live, and taxes where the lottery is being held, if it is different from where you live. No US-based lottery will pay out any winnings without first deducting the taxes due on those winnings - usually, a full 38%. US lottery winnings are taxable, as are ALL lottery wins over $600, anywhere in the world, if the player is a US citizen.

Now when you invest money you have to pay Capital gains tax. In the United States, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income. Capital gains are generally taxed at a preferential rate in comparison to ordinary income. This is intended to provide incentives for investors to make capital investments and to fund entrepreneurial activity. The amount an investor is taxed depends on both his or her tax bracket, and the amount of time the investment was held before being sold. Short-term capital gains are taxed at the investor's ordinary income tax rate, and are defined as investments held for a year or less before being sold. Long-term capital gains, which apply to assets held for more than one year, are taxed at a lower rate than short-term gains. In 2003, this rate was reduced to 15%, and

to 5% for individuals in the lowest two income tax brackets. These reduced tax rates were passed with a sunset provision and are effective through 2011; if they are not extended before that time, they will expire and revert to the rates in effect before 2003, which were generally 20%.The reduced 15% tax rate on eligible dividends and capital gains, previously scheduled to expire in 2008, was extended through 2010 as a result of the Tax Reconciliation Act signed into law by President George W. Bush on May 17, 2006. As a result:

In 2008, 2009, and 2010, the tax rate on eligible dividends and long term capital gains is 0% for those in the 10% and 15% income tax brackets.

After 2010, dividends will be taxed at the taxpayer's ordinary income tax rate, regardless of his or her tax bracket.

After 2010, the long-term capital gains tax rate will be 20% (10% for taxpayers in the 15% tax bracket).

After 2010, the qualified five-year 18% capital gains rate (8% for taxpayers in the 15% tax bracket) will be reinstated.

with your pay check on the other hand is different because if you work under some employer you pay 7.65% or if you sub-contract like a 1099 form you pay like 15.3% around there. i hope this helpes.

fatboy · 7 years ago

Category: Taxes

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