Tax on James Holzhauer Jeopardy Winnings

Tax Tips

How Much Tax Will James Holzhauer Pay on His 'Jeopardy!' Winnings?

The IRS and California will take about 46% of the game-show star's winnings.

Getty Images

All good things must come to an end. For James Holzhauer, that means finally losing on the game show "Jeopardy!" after 32 straight wins and $2,462,216 in prize money. But, of course, Holzhauer won't be able to keep all that money. Uncle Sam and his offspring in California are going to want to wet their beaks, too.

SEE ALSO: What Are the Income Tax Brackets for 2019 vs. 2018?

Holzhauer's winnings will put him in the highest federal income tax bracket for 2019, which means he'll pay tax on at least a portion of his winnings at a 37% rate. As a result, he'll likely have to pay around $850,000 of his winnings to the IRS. (Since Holzhauer is married, we used the tax rate schedules for taxpayers filing a joint return.)

Even though Holzhauer lives in Nevada, where they don't have an income tax, he will also owe California income tax because "Jeopardy!" is taped in the Golden State. California's highest marginal tax rate is 12.3%. However, there's an additional 1% surcharge on all taxable income over $1 million that's imposed to help pay for mental health services in California. For a joint filer, that comes to around $288,000 in California tax.

When you add it all up, the combined federal and state income tax on Holzhauer's winnings come to about $1.138 million — or approximately 46% of his winnings. That leaves a little over $1.32 million that he'll actually get to keep for himself. To make sure the IRS and California get their cut, the taxes will be withheld from his overall payout.

Advertisement

There's a lesson for the rest of us in this story: Prizes are taxable income (for non-cash prizes, tax is based on the fair market value). So, if you ever win a game show, lottery or even a local raffle, don't go out and blow all your winnings without first putting some of it aside to pay the government.

SEE ALSO: Can You Answer Jeopardy's Trickiest Investing Questions?