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when you win millions at the casino

Casino Winnings & Annuity Payments

A lucky night at the casino comes with a number of financial decisions, including deciding whether to receive winnings as a lump sum or structured settlement. Both payout options are subject to inflation and can be cashed in for immediate money.

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Receiving Casino Winnings

Winning big at the casino can come with a number of tax implications and financial decisions, specifically when choosing the best payout method. Typically, winnings are placed in a structured settlement providing consistent payments for a determined period of time. But what if you want the winnings now? In this case, winners can choose to sell a portion or all of their casino settlement in exchange for a lump sum of cash.

While receiving a one-time lump sum allows winners to address bigger financial emergencies, including paying for college tuition or medical expenses, receiving a lump sum payment can also negatively influence spending and saving habits. In addition, lump sum payments are taxed as ordinary income, though you only have to pay them one time.

On the other hand, receiving casino winnings as a structured settlement provides a controlled income stream over a longer period. Payments are not taxed until they are disbursed, allowing for interest to accrue over time. However, this payout option limits the amount of cash a winner receives at one time, especially if additional funds are needed for financial emergencies.

How Do Casinos Pay Out Large Sums of Money?

You’ve just had a lucky night. While you are still in the casino, you will need to provide identification and sign IRS tax forms in order to accept your prize. And then you get your money, right?

Casinos have various ways of paying winners. Generally, if the winnings are $25,000 or less, winners can choose between cash or check. If the winnings are larger, the options may change depending on the location of the casino and the game gambled upon.

Some games allow for a lump sum disbursement, where the money is paid upfront. Other games disburse winnings through an annuity, where the money is paid in installments. Often, winners have up to 90 days to decide whether they want a lump sum or annuity, though in some cases they are not given a disbursement option, and only a lump sum is offered.

All winnings — specifically from lottery payouts, poker tournaments, horse races and slot machines — are taxable at the federal level, and some may be taxable at the state level, too. Since each state has its own set of regulations for gambling taxes, be sure to pay close attention to the local requirements before filing your next tax return. In addition to state tax, the IRS also taxes gambling winnings. For certain games and for larger winnings, winners will receive IRS Form W2-G from the payer.

  • $600 or more in gambling winnings, except winnings from bingo, keno, slot machines, and poker tournaments, if the amount is at least 300 times your bet
  • $1,200 or more from a slot machine or bingo game
  • $1,500 or more in keno winnings
  • $5,000 or more in a poker tournament

If winnings meet or exceed the above thresholds, the casino will withhold up to 25 percent of your winnings in taxes before disbursing the final amount.

Lump Sum vs. Annuity Payments for Casino Winnings

The quickest way to determine how winnings are disbursed is to look at the faces of common slot machines. It will clearly disclose whether the machine is an annuity game or an immediate full-pay win.

If you are given the choice of payout options, it may be wise to consult with a certified financial planner, tax attorney or certified public accountant to help determine the best decision.

Choosing the lump sum option from the casino means settling for cash at a discounted rate of 50 to 60 percent of the total winnings. The lump sum discount rate is determined through either the current prime rate or a rate formulated from U.S. Treasury securities chosen by the licensee.

While this option provides a bulk of cash all at once, winners have to pay taxes on the sum in its entirety the same year it is distributed. However, the taxes are paid only once. This option may work best for those looking to pay off debt or address other immediate financial needs.

Claiming a casino annuity means committing your winnings to a long-term payment plan that can take 20 to 30 years to fully disburse. This guarantees an additional income stream over time. Generally, winnings are paid at the minimum amount annually.

  • Periodic payments are used for prizes of $100,000 or more.
  • If the prize is between $100,000 and $200,000, payments will amount to at least $10,000 annually.
  • If the prize is more than $200,000, the annual payments will not be less than 5 percent of the total amount.

However, leaving casino winnings in an annuity sacrifices some of the value of your money.

Learn Which Casino Payout Option Is Best for You, a Lump Sum or Annuity. What You Do With Your Casino Winnings Could Affect Your Taxes & Finances in the Future.

6 of the Biggest Vegas Wins in History

1. $21 million and $4.6 million dollars

It’s hard to fathom winning millions of dollars in a Las Vegas slot machine, but one man found himself in that position twice. Elmer Sherwin, a World War II vet was 76 when he won a $4.6 million dollar Megabucks jackpot, a mere 10 hours after The Mirage opened to the public. He used the money to travel the world. Even with the big win, Sherwin continued to play the slots once or twice a week in hopes of being the first, second-time winner. Sixteen years later, he won 21 million dollars in the same jackpot. This time around, he gave a lot of his money to charity, including the victims of Hurricane Katrina.

2. $8.9 million

71-year-old Amy Nishimura won her jackpot while on vacation from her home in Hawaii. Every time she visited Vegas, Nishimura played the same machine—her machine—at the Freemont Hotel, which she is said to have talked to in order to give her luck. She played for 3 hours with less than 100 dollars before her big win of nearly 9 million dollars. Just goes to show that a little bit of tenacity goes a long way.

3. $39.7 million

At the Excalibur Casino, an unknown 25-year-old man from Los Angeles came to pass the time while waiting for a basketball game. He left with one of the biggest Vegas payouts of all-time, worth more than $39 million dollars! Not a bad way to pass the time. The anonymous man decided to take a $1.5 million dollar a year payout for the next 25 years.

4. Between $20 million and $40 million

Not every slot player comes to Vegas with the hopes of becoming a millionaire. For Kerry Packer, an Australian billionaire, the trip was one of many high roller adventures. During the 1997 trip, Packer won somewhere between $20 and 40 million dollars in blackjack and baccarat. Rumor has it he tipped his doorman a cool million. Unfortunately for Packer, his luck would run out two years later when he lost $28 million in a London casino. Some people just don’t know when to quit when they’re ahead.

5. $680,000 and $27+ million

In the Palace Station Hotel, a 60-some-odd-year-old woman won $680,000 on The Wheel of Fortune machine. Instead of going out to spend that impressive chunk of change, the woman continued to play the Vegas machines. A few months later, she won more than $27 million in the Megabucks jackpot. I guess the lesson here is to never settle?

6. $11 million

In 1996, postal worker John Tippin went on vacation to Vegas and hit the Megabucks. In 2001, he published a book about the after effects of his trip. I Did It! My Life After Megabucks describes the downside to becoming a multimillionaire, including the isolation and paranoia he felt. Poor guy. Feel sorry for him?

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