9. Plan charitable gifts. You can offset the additional income from your lottery winnings with a charitable deduction. But you must make your donation by Dec. 31.
For gifts to a public charity, donors are entitled to an income tax deduction for up to 50% of adjusted gross income (AGI) for cash contributions and up to 30% for donations of other appreciated assets held more than 12 months.
If you are unable to decide between now and year-end which charities to support, it may be worth considering a donor-advised fund. With a donor-advised fund, you can make a charitable donation this year and claim a federal tax deduction for your irrevocable contribution but postpone recommendations about which charities should receive grants from the account until some time in the future. If you don’t want to be badgered by requests, see my post, “How To Stay Anonymous When You Give To Charity.”
10. Review your estate plan. If your winnings have made you suddenly wealthy, this may be the first time that you need to plan for estate tax. The 2012 tax law offers more flexibility than ever before. Each person has a $5.25 $5.43 million limit on tax-free transfers, which can be applied during life, when you die or some combination of the two. So if you want to share some of your largess with family and friends, this is the ideal time to do that. For details, see my posts, “6 Ways To Give Family And Friends Financial Aid” and “ Give Your Estate Plan a Checkup.”