How Will Receiving a Large Sum of Money Affect Your Taxes?
Amherst, NH Resident Looks for Answers
If you receive a large sum of money, the tax rate will depend on why you received the money. Money that is received through the lottery or other winnings is generally taxed at your standard tax rate. When the windfall is received because of selling real estate properties or a business, the rate will usually fall under the long-term capital gains rate, if the assets have been in your possession long enough. Money received as an inheritance may be subject to the inheritance tax depending on the state you live in. New Hampshire does not have an estate tax.
An Amherst resident recently received a large amount of money from his employer. Concerned about how this would affect his taxes at the end of the year, he sought the advice of Merrimack Tax Associates.
The Source of the Money Matters When It Comes to Taxes
Not all money received as a sum is taxed the same. The tax rate will be based on how the money was received, from your standard tax rate to short and long-term capital gains and estate taxes if that is applicable in the state that you reside in. If the money is received as a bonus or payout from an employer, the money will be taxed as your standard paycheck. The withholdings will be higher because it is a larger amount of money, but the percentage rate will be the same.
Consider Your Tax Bracket
One area that can be greatly affected by this type of payout is your tax bracket. Receiving a large amount of money from an employer can push your family’s income to the next level, requiring you to pay a higher tax rate for all money that you earned in the year. This can lead to you owing taxes at the end of the year, as the higher tax rate was not anticipated.
The Amherst resident was able to work with the Merrimack Tax Associates’ team to determine exactly how this money would affect his taxes for the year. He can now plan ahead and will know what to expect when it is time to file taxes.