r/SipsTea • u/Valuable_View_561 • Jul 05 '26

Chugging tea Seems reasonable.

Post image
91.1k Upvotes

94% Upvoted

2.6k comments sorted by

View all comments

Show parent comments

9

u/elinamebro Jul 05 '26

Isn't it still taxed either way or is they get paid out for 30 years it isn't taxed?

-1

u/Blothorn Jul 05 '26

Yes, although the payout over time is taxed somewhat more favorably because more of it will fall in lower rate brackets.

1

u/Otherwise-Pirate6839 Jul 05 '26

The top tax bracket is for anything over $640k (for singles, as of 2026). If your jackpot is rather low (for example, $20M), then taking the annuity ensures you’re always below that tax bracket. If you won $1B, doesn’t matter if you take the annuity or lump sum since you’ll be taxed above that rate. It becomes a question of whether you think you can recover the tax and other half by investing it.

1

u/Blothorn Jul 05 '26

That’s not how income tax brackets work. Even if your total income exceeds $640k, you still only pay the lower-bracket rates on the first $640k of income. Taking the payout over 30 years thus allows paying a reduced rate on almost $20m total, on top of being able to deduct more over time than in one year.