I'll Take "Taxes" for $1 Million, Alex!
Admit it … like millions of Americans, you got caught up in the excitement of watching James Holzhauer’s epic run on Jeopardy! His thirty-two wins – eleven of which happened without him giving a single incorrect response – resulted in a total prize of $2,462,216. Although he fell a little over $58,000 short of Ken Jennings’s all-time earnings record, that’s still a nice reward. But we all know that Holzhauer won’t end up with anywhere near that amount.
Even if his regular activity as a professional gambler doesn’t result in any additional income, Holzhauer’s Jeopardy! winnings alone will put him in the IRS’s top tax bracket, resulting in a portion of his earnings being taxed at 37%. This means his federal tax bill will be around $850,000.
Holzhauer is a resident of Nevada, one of seven states without an individual income tax. However, since the game show films in California and income is taxed at its source, the Golden State will tax the prize money.
California’s top tax rate is 12.3%. If that wasn’t bad enough, the state imposes an additional 1% “mental health services” tax (insert your own joke here!) on income over $1 million. Therefore, Holzhauer’s state tax bill will come to $288,000.
His combined federal and state tax bite is about 46% of his total winnings. But before you feel too bad for him, realize Holzhauer ends up with $1.32 million, which is not a bad payday at all for the few days’ work that kept us all entertained!