How can lottery winnings be split with your adult children without paying gift tax?

Answer 1

If you have already claimed the winnings, there is nothing you can do with that thought to reduce taxes. If not, you can form a partnership or other entity to claim the winnings. I recommend you consult with a CPA before you claim the winnings.

Answer 2

First, gee - I thought you all owned the ticket and were all the lottery winners! Otherwise, a fairly large amount of value in gifts can be given to children each year, by each parent. About 12.5K a year, to each kid, from each mom and dad - for 25K each...gift tax free. Next year same thing... And if that isn't big enough to do it, there are other ways it can easily be handled...but then your certainly dealing with enough $ that getting professional help with it, (and wills and living trusts, etc, etc.) makes a lot of sense.

Answer 3

In the year that you receive the lottery prize the distribution amount is added to all of your other gross worldwide income and taxed at your marginal tax rates on the 1040 federal income tax return from the 10% to the 35% maximum rate for the 2009 and 2010 tax year.

You cannot reduce the taxes but before you receive the lump sum amount you may be able to choose to receive the amount over a period of years and then have to pay the income taxes that would be due on the amounts that are received each year until you receive all of your winning amount.

Answer 4

Only if your winnings are less than 50% of your adjusted Gross Income. But, if you win a huge jackpot (one that is much larger than your regular income), you would only be able deduct ~50% of it by giving it away. So don't give it all away before checking with your tax advisor!