"One million dollars, tax-free!"

I’ve heard the phrase ‘tax-free’ used in cheesy novels and movies about someone getting a hefty load of money – but does ‘tax-free’ money exist in the real world? Without getting paid under the table or doing other illicit activities, I mean.

And is there a ‘salary cap’ of money allowed to be tax-free before Uncle Sam (or whatever government) steps in and gets their share?

They have a “Tax-Free million” scratch-off game for NY Lottery. But you actually win more than a million (like 1.7M) so that after tax you end up with a million.

Lottery winnings are completely tax free in Canada (at least in Ontario)

In Great Britain, the winnings on their version of WWTBAM aren’t taxed at all. It’s really a great deal, because if you win the million here Uncle Sam takes about 45% off the top, leaving you with around $550,000. If you win over there across The Pond, Aunt Liz doesn’t take anything. And what with the exchange rates and all, you’ll really wind up with quite a haul. One million pounds is around $1,590,000 and change these days. Tax-free.

So are winnings from any other form of gambling–horseracing, legal sports wagering (i.e Pro-Line and the like), casinos, and so on.

Winnings from game shows are tax-free too, though the prizes are usually so cheesy and cheap that even if they were taxed, you wouldn’t have to worry about paying any. Anybody remember the “champions” on Definition winning $20 or so in the bonus round?

[Steve Martin]
You can be a Millionaire and never pay taxes!
How?
First, get a million dollars.
Then…
[/Steve Martin]

Of course, a government can establish its own rules. Then, the winnings are not reported as income. If a private lottery (legal in the U.S.?) promises “tax-free”, it means, that they have to pay your taxes. At what rate? Not reporting you winnins to the IRS is possible, but illegal.

Peace

Off the top of my head, I can think of two examples–well, one and a half. If I’m not mistaken, life insurance proceeds (maybe all insurance proceeds?) are exempt from the income tax, though if not handled properly (before death, not after), they can be a part of the decedent’s estate.

The second example is related–inheritances are not taxable as income. They are of course subject to the estate tax while a part of the estate, and may be subject to the inheritance tax and state estate tax, depending on which state the estate is in.

Of course, you can’t exactly plan for the circumstances around either of these examples…or can you?

Lots of big USA Comp’s don’t pay taxes…

All in all, after taxes & medical benefits, Etc, the tax rates for England & the US are really pretty close. As a matter of fact I even saw the weather report for London & compared it to my city, pacific Grove, Calif & they were almost identical.

As for tax free money, sure, if you win a medical lawsuit, you get to keep the money, as far as I know its not taxed.

In the U.S. families below a certain income level pay no taxes. For example, a familie of four with a total, combined income below $17,000 a year pays no income taxes at all. At least, MY family didn’t when I was a kid. The tax code might’ve changed since then. (We’re talking 15-20 years ago) We still had to pay local property taxes on our house and sales txes which everyone pays, but that was it.

State law governs whether or not lottery winnings are subject to state tax. As far as Uncle Sam, except for the circumstances mentioned above, I’m afraid it’s taxable income. Sob.

It must be pointed out that while you clearly do win more than 3 times the money in the UK version of Millionaire, it’s obviously much more than 3 times as difficult. The US has had 6 millionaires and last time I checked the UK version had none. Just something to keep in mind…

Alaska has no state taxes at all. In fact you get money every year just by living there - I think around $1000 a year. The state gets a ton of money from oil royalties - that is why they can even afford to give some away.

Of course it is very expensive to live there - some things cost twice what they do in the rest of the US. They do make good money though.

I can think of at least two distinct reasons there’ve been 6 millionaires on the US version and one now, I believe, in Britain. Only one of them involves the possibility that the US show is easier… :)[sub]first documented use of a smilie by johnson[/sub]

To get on the US version of Millionaire, you have to get a total of 8 test questions right (in 2 rounds) over the phone to get in the pool from which contestants are drawn. In the UK, it only takes 1 question (correct me if that’s changed, anyone). So, you might just wind up with a higher percentage of trivia-oriented people in the US version. The audition system being used for January shows may have a different contestant population.

If you do win, you get the whole sum and deal with taxes yourself (in the UK, you get handed your winnings right on the set, due to the tax laws that are derived from racetrack gambling). The show will include a 1099 form so Uncle can find you. Oddly, the state of New York does NOT tax game-show winnings, unless it’s part of your “regular occupation.” If your own state is another one, your winnings may be taxable there, though. California takes 7 percent off the top of any prizes won out there - even if you only win merchandise, you have to send a check for the amount of the tax before they can ship it to you.

On the US Millionaire program, one guy who won $1M said that after state & federal taxes he got a paltry $550,000!

Not to send this into Great Debates, but considering that Canada & Britain both take more than 50% of their citizens income every week its awfully sporting of them to let lottery winners keep it all…

"Canada & Britain both take more than
50% of their citizens income every week "

Yeah, but they get free medical care too. That’s why they take so much.

A lottery is just a tax on the poor. Rich people need not play it.

…grabbing calculator and latest pay stub…

Hey, wait a minute! I am only missing 31% of my paycheck! And that includes the deduction for my parking! I am getting ripped off! Someone call Jean Chretien for me and tell them they are missing some…

Well, maybe I don’t make enough to have the priviledge of having 50% of my paycheck taken away. Hmmm… Let me check… according to this, I would have to use some very creative accounting to pay over 50% of my income in tax.

And I get free health care? And I get my lottery winnings tax free? Woo Hoo! :smiley:

Actually, I remember reading in the news recently that there has been some discussion of taking away our “tax-free” status for lottery winnings, but the cite eludes me currently. Hope it never happens though. Not that I win the lottery a lot anyways…