Via: Wallet Pop
Imagine you’ve made it to the final Tribal Council on Survivor. It’s time to determine the winner, and host Jeff Probst keeps pulling slips bearing your name. Finally, he announces that you are the champion. Congratulations, you just won… $580,000!
Wait a minute, Jeff. Hang on. Isn’t that prize short a few hundred thousand? I ate rancid sheep guts. I passed out from exhaustion. I earned my million bucks.
Nope. As the first Survivor winner, Richard Hatch, discovered through convictions and prison time, even if you win a prize on television, Uncle Sam counts it as taxable income. How much you’re taxed depends on your income and the state you live in (because if your state levies income taxes, it will want its bite, too). However, it’s safe to say that you’ll lose nearly half to the taxman. If you want to survive on Survivor winnings for 20 years, you’ll have to budget less than $30,000 a year after taxes.For shows with $500,000 prizes, such as Big Brother, the tax bracket is lower so the scale slips, but you still only come away with about $375,000. (CBS reps for The Amazing Race and Big Brother did not respond to WalletPop’s requests for prize information.)
Contestants can’t claim ignorance. The tax information is in the fine print of the contract they sign when they first appear on the show. At one of Hatch’s trials, Survivor’s producer, Mark Burnett, got on the stand and confirmed that when contestants sign their contracts, they agree to pay taxes on their winnings. Subsequently, Hatch went to jail.
In 2007, eagle-eyed fans at the TV news site RealityBlurred.com freeze-framed the payout terms of NBC’s America’s Got Talent and discovered the prize, repeated on television as a million-dollar award, actually came with plenty of strings attached. One of which was that the contestant could choose to receive the prize in the form of a financial annuity paid out over forty years, or they could choose to receive the present cash value of that annuity.
An annuity is designed to pay over time and isn’t worth as much if you cash out early. Reality Blurred’s accountant calculated that if a winner took the prize annually, it would pay about $25,000 for 40 years, but if he wanted his winnings in a lump sum, it would only yield $450,426, or about $375,000 after taxes. That’s about one-third of the promised million bucks. In fact, it’s close to what you’d get if you won a $500,000 prize as a one-time payment.
