Taxes take a bite out of sole 'Survivor'
Richard Hatch, the survivor who walked off rat-infested Pulau Tiga island $1 million richer is turning over a chunk of that cash to an unexpected participant in the game - Uncle Sam.
Financial investment specialists H&R Block calculated that the federal government will carve out $370,000 in taxes. Rhode Island, Mr. Hatch's home state, will take another $100,000 from his $1 million purse. Still, H&R Block points out, $530,000 isn't bad for 39 days of work.
The company estimates that if Hatch invests $500,000 of his winnings, gets an 8 percent after-tax return, reinvests the interest, and leaves it alone until he turns 55 (16 years away), he will build a $1.8 million nest egg. H&R Block based this on a tax rate for a single person with no other income.
Hatch isn't alone. The handful of winners of "Who Wants to be a Millionaire" have also seen their payoff shrink thanks to taxes. The first winner of the show last November, John Carpenter, walked away $372,370 lighter, thanks to federal taxes. The show would need to give away about $1.62 million per person for winners to be true millionaires.
It's even worse if you are self-employed. In this case, federal tax on $1 million is $365,285, Social Security tax is $9,002, and Medicare tax is $26,782. This leaves you with $598,931.
The easiest way to receive $1 million in its entirety is to have someone give it to you as a gift. The donor is then responsible for the gift taxes, not you.
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