Won money on a game show. Now what? (aka new member in Seattle)

[Chris Karras]

I did win money on a game show, but I was already saving up for a downpayment on an investment property. Now that I have enough to make the investment, I need to figure out the smartest way to go about it (and not lose all my winnings to Uncle Sam). My parents and in-laws both own multifamily properties in other parts of the country, so I'm not completely uninformed, but I don't want to do anything stupid. 

Right now, I'm considering buying a multifamily property, but I definitely can't afford anything in Seattle, so I'm thinking of either the Tacoma or Everett areas. I've also thought about buying in Colorado Springs, where the in-laws own a couple of duplexes and thus know the market (and where we like to visit, because sunshine!).

I'm looking forward to learning from all the folks here! I'm especially thinking about taxes/tax benefits of RE investing, how to think about the financial aspects (ROI, appreciation/depreciation), and how and where to find a good property.

[Linda Weygant]

Originally posted by @Jeff B.:

CAVEAT EMPTOR - - such income is taxed at 50% I believe.  Check with your CPA, prepay the taxes with a 1040est and THEN see what you have to work with.

DO NOT get into the situation where you OWE and can't pay immediately, the interest charges will eat you alive.

I don't know how this rumor ever got started, but it's not true.  

Prize money is taxed as ordinary income.  It can bump you up into the next bracket and such, but it's not taxed at 50%.  The highest US tax bracket is 39.6%.  It is also subject to whatever the state tax bracket is.

As with lottery winnings, taxes are withheld at the source, so usually the game show itself will withhold between 25% and 35% of your winnings and send them into the IRS for you.

However, the OPs post was not about the taxes on his winnings, but rather how to invest his winnings in real estate, so we'll get back to that discussion....