Taxes on Winning the Lottery Jackpot
If you win the lottery, you’ll most likely be tempted to withdraw all of your winnings at once, but this is not necessarily the best approach. In some countries, winning the lottery does not trigger any personal income tax, making the payout much less than what’s advertised. Similarly, the prize you receive is less than what’s advertised, especially when the time value of money is taken into account, as well as when income taxes are applied. But you may have other options if you’d prefer to receive your lottery prize in an ongoing payment instead of a lump sum.
Those who win the lottery should understand that they don’t live to see their winnings – they may die penniless or experience bad luck that leaves them penniless. That’s why you should have a ready-made excuse in case you suddenly get the call from a lottery salesperson. Moreover, it’s easier than ever to play the lottery nowadays, thanks to the rise of platforms like theLotter. Although lottery winning is not a sure bet, it is still a good way to strike it rich. In fact, the majority of lottery players come from the lower economic classes.
While a winning lottery ticket can make a person a multimillionaire, winnings over $600 are subject to federal and state income tax. Currently, the federal government takes 24% of lottery jackpots and up to 37% of lottery payouts. State taxes can be as high as 8.95%, so it is a good idea to check the state taxes before you decide on a lottery payout. Once you have the sum of money, you can choose to withdraw it in cash or take an annuity.