Congratulations! You’re here because you won the lottery and that’s cause for celebration.
If you’re wondering whether or not you’ll owe taxes on your lotto winnings, the short answer is: yes. Uncle Sam treats lottery winnings just like your ordinary income and your state may do so as well.
We know a part of you was hoping the answer would be something like, “Nope, it’s all yours and you get to spend all of it!” But don’t fret—we’ll answer some common lottery related tax questions to help you make it through tax season with your luck intact.
Take note! We are not tax experts. For the official word on lottery winnings and your federal and state taxes, double check the gambling income rules laid out at IRS.gov, your state taxing authority and contact a CPA or tax attorney.
Do I really have to pay taxes on my sweet, sweet jackpot?
Lotto winnings are considered gambling income, which is indeed taxable.
Generally, if you receive $600 or more in gambling winnings, the payer (the state lottery) is required to issue you a W-2G for reporting your lotto winnings and any federal income tax already withheld on those winnings. And when you file your taxes come April, all gambling winnings from the year should be reported as “Other Income” on your federal tax return form.
On the flip side, it’s also possible to deduct your lottery losses—the cost of your losing lottery tickets—on your taxes. For folks who itemize their deductions and keep records of their winnings and losses, you can deduct your gambling losses from the year up to—but not over—the amount you also reported winning.
So, if you won $100 on the lottery and lost $300 in losing lottery tickets, you could potentially deduct up to $100 on your tax return.
What is the tax rate for lottery winnings?
This really depends on where you live. State and local governments might require you to pay taxes on your win in addition to the federal taxes. Let’s break it down a bit:
Federal Tax
State lotteries are required to withhold 25% from winnings of $5,000 or more (minus the wager), which will go to the federal government. There could be a difference between this mandatory withholding amount and what you’ll ultimately owe the IRS, depending on your tax bracket.
State and Local Tax
Check both your state’s tax website and your city’s tax website for information on the rules that apply to you.
For example, if you hit it big in The Big Apple, the New York State government will withhold 8.82%—on top of the federal withholding of 25%.
If your dream is to be a full-time lottery winner, consider moving to California, New Hampshire or Tennessee—all three exclude their state lottery winnings from taxable income.
How do I deduct my lottery losses?
Deducting your losses is a possibility if you itemize your deductions on Schedule A (Form 1040) but not if you take the standard deduction.
Keeping good records is essential. You should also be able to provide supplemental records, like payment slips and winning statements, to back up the amounts you report on your taxes.
This is where Jackpocket comes in handy! Jackpocket lottery app players can see all their ticket orders anytime in the Orders section of the app.
Just tap Orders at the bottom of the home screen to view past orders and ticket scans. You can even filter by winning tickets only.
For more information, check out “How Do I Claim My Gambling Wins and/or Losses?” on the IRS website.
Keep up the good luck!
*Jackpocket does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors regarding your federal and state taxes.
