This article breaks down the tax implications of winning a lottery jackpot, including federal, state, and out-of-state taxes. It explores the impact of different payout options and highlights the importance of seeking professional tax advice.
Everyone owes federal taxes on lottery winnings. While an automatic 24% is withheld upfront, you would almost certainly owe a total of 37% when filing your 2024 tax return, as winning a billion dollars would put you in a higher tax bracket. State taxes on lottery winnings in the U.S. generally range from 3% to 6%, with New York imposing the highest rate at 10.9%. However, eight states don't tax lottery winnings at all: If you live in any of these states, you will take home the maximum payout.
That works out to $325,184,812 as a cash lump sum, or a 30-year annuity totaling $725,754,360. While the cash payout is much less than the annuity, winners usually take the lump sum since they get more money right away. for the annuity and $56,254,900 for the cash lump sum. Where you buy the ticket also matters, as a winning ticket purchased out of state could be subject to that state's taxes. In most cases, your home state will require you to report out-of-state winnings but will usually offer you a credit for taxes already paid. State lottery tax laws vary, so if you win a lottery prize in a state other than your own, consult a tax professional. They can also help you determine the best payout option based on your financial goals
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