Winning the Lottery Part 2

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April 18, 2019
Winning the Lottery Part 2

Image Copyright Ted Grussing Photography – Used with permission

Last week we talked about the fact that if you already have financial trouble, winning the lottery will not necessarily solve all of your problems. This week we would like to expand on that idea and learn more about the actual money you receive if you win!

The jackpot was over 1 million dollars, so if you win you’ve got an extra million dollars to your name, right? Unfortunately, it isn’t quite as simple as that.

If you win the lottery you can choose to take the lump sum or an annual income stream for life.

Remember, as far as Uncle Sam is concerned, the winnings count as ordinary income. If you choose to take the lump sum, a large portion will be skimmed off the top before the lump sum is given to you. In the worst cases a lucky winner could potentially pay up to 39.6% on all or a portion of their winnings.

Your State Department of Revenue Services also wants their take. These rates vary state to state. However, some states (such as New York) have federal, state, county and city taxes to further reduce your winnings.

That brings your announced winnings down further. So you can see where this is going…Uncle Sam doesn’t care that your jackpot was reduced for the lump sum. You still received it!

There are some states in the U.S. with no state income tax, so just make sure you win the lottery in the right state!

All that to say, the reduced cash payout is still nothing to sneeze at. We will discuss some ways a winner can protect what he/she collects from their prize in a future segment.

Have a Happy Easter and a wonderful weekend!

Source: What Taxes Do I Pay On Lottery Winnings? (n.d.). Retrieved from http://www.lotteryuniverse.com/mega-millions-taxes-on-lottery-winnings.aspx