What Taxes Do Lottery Winners Pay?
In the United States, the federal government generally treats winnings the same way as regular wage earnings. The normal taxation rates of 10 to 37 percent apply. As you earn or win more money in a calendar year, a greater percentage of these funds must be paid in federal income tax.
Although some state governments don't tax winnings, the majority do. Certain states charge lottery taxes in excess of 8 percent, according to CNBC. Cities also have the option to tax winnings. They generally tax this money at the same rate as regular income.
If you win an especially large amount and have the option to receive annual payments or a lump sum, this decision will affect your taxes. Unless you already have a rather high income, you'll probably pay a lower rate by choosing the yearly annuity payments.
Federal, state and/or local authorities may withhold a portion of your winnings. However, this usually isn't the exact amount you owe. Depending on your total income, you could qualify for a refund or need to pay more. You may benefit from consulting with a tax preparer or accountant.
This is not intended to be personalized professional financial advice; speak to a qualified tax preparer if you have questions. LotteryTaxes.com is not associated with any lottery commission or tax agency.