Amy Schneider is out of "Jeopardy!." She made history on the show nonetheless.
Schneider, an Oakland, California-based software engineering manager, was defeated Wednesday by Rhone Talsma, a librarian from Chicago, after a 40-game winning streak.
Still, Schneider has notched the second-most wins of all time, coming up short only to Ken Jennings' record of 74 consecutive games won. At the end of her time on the game show, she amassed nearly $1.4 million in winnings.
With that purse, she'll leave the show a wealthy woman. She'll also have to pay a large chunk to Uncle Sam.
"She's going to have a pretty hefty tax bill because the income she's earned on the show is ordinary income," said Megan Gorman, an attorney and managing partner at Chequers Financial Management in San Francisco. "She'll be paying some of the top rates in the United States on this income."
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The tax breakdown
Winning more than $1 million will place Schneider in the top tax bracket in the country. Given that Schneider is likely a single filer, that means she'll have a 37% federal tax rate for at least a portion of the earnings.
In California, where Schneider lives and the show is filmed, she's also subject to one of the highest state tax rates in the country.
Again, winnings of more than $1 million will put her in the top tax bracket in the state, meaning she'll owe an additional 13.3% — 12.3% is the top tax rate, and income of more than $1 million is subject to an additional 1% mental health services tax, Gorman said.
At the end of her run, Schneider had won a total of $1,382,800. With that sum, she'll likely owe more than $471,000 in federal taxes and more than $150,000 to California, according to 2021 tax tables and assuming she takes the standard deduction.
That means that right away, she'll owe nearly $625,000 to taxes and be hit with an overall tax rate of more than 45%. Still, she'll likely take home more than $755,000.
"It's a pretty arduous win from a tax perspective," Gorman said.
It's good news for Schneider that she's a California resident, though, Gorman explained.
That means she won't have to pay taxes on the income in two states, as other winners have had to. In that case, they're given a credit back for the income taxes paid in California, which adds a layer of complication to filing that Schneider can avoid.
Professional help is a must
To be sure, three-quarters of a million dollars is still a life-changing number to win, Gorman said. But "it's pretty amazing how much of it goes to taxes," she said.
Still, it's important that Schneider seek tax advice from a qualified professional to ensure she pays her taxes correctly. Many game shows do not withhold any portion of winnings for taxes, leaving it on the contestant to send the correct amount to the IRS.
"Hopefully Amy is speaking with her tax professional now in order to move forward with getting the right advice," Gorman said.
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