Posts tagged as:

earned-income

Ask the taxgirl: Lotto Winnings & Other Income

January 4, 2009 · 2 comments

Taxpayer asks:


I deliver newspapers. Wondering if the Christmas money I receive is taxable. Also, why are lotto winnings taxable? How are you working for that money?

Taxgirl says:

I believe that the money that you receive at Christmas is taxable. It is not really a *gift* (read more about gifts and bonuses here). It’s an acknowledgement of good service. In that way, it’s like a bonus or a tip. And it would be taxable.

Regarding the lotto winnings, I know it’s an irritating rule but there’s nothing in the tax code that says income has to be “earned.” Both “earned” and “unearned” income are taxed.

No disrespect to my readers with fat investment accounts, but dividends and interest aren’t really the fruits of your labor either. But the IRS doesn’t care.

You can think of income tax as a tax on your “accession to wealth” (wouldn’t it be nice if we were all acceding to wealth a little more quickly?). Increases in your wealth – whether through your own efforts or not – are generally taxable.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – Now on Facebook!

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Fix the Tax Code Friday: Dividends and Interest

August 17, 2007 · 0 comments

Many proponents of the flat tax have advocated for the elimination of tax on dividends and interest, leaving only a tax on wages and “earned income”. The argument for the elimination of such a tax is that it would encourage investments and savings and thus, stimulate the economy. The argument against the proposition is that it unfairly places a tax burden on those who must work for a living and not rely on “passive income” (dividends and interest). What do you think:

Should Congress eliminate the tax on dividends and interest and implement a flat tax on wages and “earned income”?

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