Tax Refund

Winning a large Lottery Jackpot is a dream come true for many! Everyone scrambles around to get last-minute tickets and hopes to be a winner of the next large jackpot in lottery history. But lottery participants aren’t the only ones excited about the lottery frenzy; some state governments are just as ecstatic since the taxes on one lump-sum payment could mean millions in state revenue.

Admittedly, your chances of correctly choosing all Mega Million numbers are slim – one in 302,575,350 – but every big drawing is a prime opportunity to think about the tax implications of winning money, big or small.

Your Lucky Day

All lottery winnings are subject to Federal and (sometimes) state income taxes and sizable jackpots are taxed at the maximum federal rate of 37%. That means if you take your $1.05 billion Mega Millions winnings all at once instead of over 30 years, the estimated $527.9 million cash payout will automatically be taxed at 24% (approx $127 million). If you’re the lucky winner, you will also still be taxed on the difference between the initial amount taken off the top and the top income rate of 37%.

The Facts About Gambling Winnings

The odds are you won’t need to worry about paying taxes on more than a billion dollars (If only!) But the odds are good that you’ll someday win a smaller jackpot, a sports bet, or a stack of cash at the blackjack table. Casinos and other gaming organizations will send you a Form W-2G if you:

  • Win $1,200 or more on a slot machine or from bingo
  • Win $1,500 or more on a keno jackpot
  • Win more than $5,000 in a poker tournament
  • Win $600 or more on all other games, but only if the payout is at least 300 times your wager

If you had an unlucky year, know that gambling losses are tax deductible, but only to the extent of your winnings. Proof of losses can be kept in the form of losing tickets, win/loss statements, etc. While gambling winnings are treated as ordinary income, losses are itemized deductions. This requires you to report all the money you win as taxable income on your tax return. However, the tax deduction for your losses is only available if you itemize your deductions.

Don’t worry about knowing these tax laws. TurboTax will ask you simple questions and give you the tax deductions and credits you’re eligible for. If you have questions, you can connect live via one-way video to a TurboTax Live tax expert to get your tax questions answered. A TurboTax Live tax expert can even review, sign, and file your tax return.

  • Previous Post

    The Tax Free Life – Duty-Free Shopping Tips for Travelers

Lisa Greene-Lewis
Lisa Greene-Lewis

Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis

One response to “How Your Lottery Winnings Are Taxed”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *