Powerball frenzy has officially taken hold, inspiring even those “I’ll never win,” folks to buy a ticket(s), and some for the first time. You’ll see long lines of optimistic players betting against the odds (which just so happen to be about one in 292 million) in hopes of winning big.
The advertised $1.5 billion – and counting – jackpot, however, isn’t exactly an accurate picture of what the winner will take home. Most players know your total take-home largely depends on whether you choose a lump-sum or opt for annual payments. But, one mustn’t forget about taxes, both federal and state… and maybe local taxes, too.
There are a total of 44 states that participate in Powerball, plus Washington, D.C., Puerto Rico and the U.S. Virgin Islands. The states that don’t, but will tax your lottery winnings anyway, are Nevada, Utah, Mississippi, Alabama, and Hawaii, according to USAMega.
For most potential Powerball winners, your state very much intends to take a large cut of the lottery winnings. New York, for example, has a steep tax rate in comparison with other states - 8.82 percent. And if you live in New York City, don’t forget about the additional local tax of 3.876 percent it will take, too.
Eleven jurisdictions, however, will leave your winnings be. If you’re lucky enough to live in a state that either has no income tax or chooses not to include lottery winnings in taxable income, you’ll be able to hold on to more of the money. Those states include Alaska, California, Delaware, Florida, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington and Wyoming.
But if you’re already packing your bags - not so fast. Under California law, for example, lottery winnings are considered taxable income if they originate from another state’s lottery.
Also, despite Indiana’s relatively low tax rate of 3.4 percent on lottery winnings, it should be noted that as of Jan. 1, the state now declares all of a taxpayer’s lottery winnings (including those from another state’s lottery), fully taxable, no longer providing any available deduction from income.
Winning the lottery may be sweet but isn't a piece of cake as some may think, and the amount you’ll take home depends largely on where you live. There are many other factors at play, too, that will affect your total winnings, such as federal tax, deductions, gift tax, charitable contributions...and family members you never knew you had.
Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should lottery winnings be taxed at all?
For more information about state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)