America’s Got Talent $1,000,000 Prize… But How Much After Taxes?
One million dollars! Its a sexy number. $1,000,000. It’s nice to look at. It’s fun to say. America is gearing up to crown its latest member to the esteemed millionaire club on the Wednesday night season finale of America’s Got Talent. That is, if we are to believe what the promotions are telling us. But what about taxes? How much money are the final four acts really set to take home if they win the grand prize? What other fine print is in play?
Landau Eugene Murphy Jr is the ultimate potential rags to riches story. A hard working professional car washer from a small town in West Virginia the idea of him joining elusive millionaire club seems hard to believe. It would be a great story if the cornrowed crooner took home the grand prize, but how much would he actually win?
From the IRS’s point of view the tax rules on prize winnings are very simple. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest or other event you must include it in your income. Landau’s potential one million dollar payday would be no exception. Landau would land himself in the same tax bracket as America’s billionaires (35%) and would face a hefty tax bill of roughly $302,000 dollars when he filed his taxes. His status as a millionaire would be revoked just as fast as it was given to him. That’s not all for our friend Landau, West Virginia wants a piece of that pie as well and after they get their roughly 6% cut of the action, Landau is staring at another tax bill of around $64,000 dollars. Landau, America’s newest millionaire would actually be nearly $366,000 short of the title.
If that’s not enough, America’s Got Talent isn’t really offering up a one million dollar check next Wednesday but they are paying out the equivalent of 1 million dollars. As the very fine print at the end of each episode reminds us “The prize, which totals $1,000,000, is payable in a financial annuity over 40 years, or the contestant may choose to receive the present cash value of such annuity.” In other words, Landau is going to have to wait 40 years to get that million dollar payday and its going to be paid out in mere $25,000 increments. While taking the cash in installments would lessen the taxes he ultimately paid on his winnings, Landau wouldn’t be retiring from his car washing job any time soon with only an extra $25,000 coming in a year. Landau’s second option would be to take the present day cash value of such an annuity which is estimated to be around $450,000 before taxes. After cutting a income tax check to the IRS ($125,000) and West Virginia ($28,000) Landau, America’s newest “millionaire” would take home $297,000. Nothing to scoff at but a far cry from the million dollars number that the producers would like us to believe.
Landau actually has the most to potentially gain by winning the grand prize in comparison to the other finalists. As a one man act he does not have to share his potential prize winnings with anybody. The 6 member young crew of musicians encompassing PopLyfe would end up with a healthy college fund if they won the
grand prize. Each member’s claim to the $450,000 present cash value payment would be $75,000. Minor children are taxed on their winnings just like their adult counterparts and PopLyfe members $75,000 share would shrink to around $63,000 after a $12,000 cut by the IRS. Not to be outdone by West Virginia, California would tax their winnings at a 9% clip to the tune of roughly $6,600 dollars. $56,400 would be a nice cushion for each of these young musicians to start the rest of their lives, but pales in the comparison to the much discussed million dollar prize.
One of the two super acts, the two favorites to ultimately take home the grand prize also would suffer a similar fate. The 11 member brilliant dance team light show act “Team Iluminate” are vying for a $41,000 grand prize before taxes each when their shares of the $450,000 are divvied up. Federal taxes ($5,700) would chop down that $41,000 to around $35,300 and since the members of the group reside in different states they can be hit with an additional state tax as high as $2,300 (New York). Team Iluminate members are each gunning for the equivalent to a new car, not a million dollars.
The final potential “million dollar” winner of America’s Got Talent is the “Silhouettes”, a 42! member ballet dance team that uses shadows to create beautiful imagery. While their size helps fill a stage and mesmerize an audience it also cuts into their individual prize winnings. The 42 members of the Silhouettes each have a claim on roughly $11,000 of current prize money or if they opt for the installment payments they would receive a check for about $600 a year for 40 years. The only good news for them is that the tax man is more generous to those with the least. The IRS would want roughly $500 dollars for their troubles and the Colorado tax department would want another $500 more. $10,000 might make a good down payment for a new car, but isn’t going to change anybody’s life.
Of course these numbers are simply approximations. Landau is actually married and his wife’s income and the number of children he has would also pay a role in determining his tax liability. The group acts may have a higher % payout agreed upon among themselves for the main choreographers of their acts. The head of Team Illuminate is a successful software engineer in New York and may already be in a higher tax bracket for the year. With so many movable parts in the average tax return and information unknown to us its hard to pinpoint an exact figure of tax owed. With that being said, we can get pretty close.
It’s disingenuous for the media to hype up a life changing million dollar prize that is just an illusion for the talent on the stage. The real award and grand prize of this show is the unrivaled exposure that has occurred which is worth more than a million dollars. Taxes and fine print leave the various acts with at most $297,000 today or as little as $600 a year for 40 years. The increase of earning power of the talent involved on the show due to the exposure of the show is life changing, not the financial grand prize itself.Source: www.backtaxeshelp.com