Taxes and Winning the Lottery
If you’re thinking about trying your luck with the lottery, you’ve come to the right place. In this article, we’ll go over the rules of lottery playing, where to buy your ticket, and how to join a pool and claim your prize. We’ll even touch on taxes, because who doesn’t like to win money? And if you win, what do you do with the money? You might be wondering how to tax your lottery winnings.
Taxes on lottery winnings
The IRS taxes lottery winnings. If you win a jackpot, the amount is taxed at 37%. This is lower than the highest bracket, and your winnings are paid out in installments. Unless you pay extra for taxes, you’ll never know how much tax you’ll have to pay, and you probably won’t know what to do with your winnings until you file your taxes. Here’s how to figure out if you’ll be required to pay taxes on lottery winnings.
New York City residents face additional withholdings of about 3.876 percent. Yonkers residents pay an additional 1.477 percent. While New York’s withholding rates are lower than the top marginal rate, there’s a reason for that. The nature of graduated taxes means that lottery winners’ effective rates are lower than their marginal rates. However, if you’re in the wrong state, the amount you owe could be astronomical.
Buying a ticket
If you have a credit card and plan on buying a lottery ticket, keep in mind that you will be incurring extra fees. Many retailers treat purchases made with credit cards as cash advances, so you’ll be charged high interest fees immediately. Another option is to use a money order, a government or bank-issued certificate of deposit. You can use these for any purpose, but you’ll likely be charged a high fee for doing so.
When it comes to gambling, buying a lottery ticket is probably one of the most accessible ways to win big money. However, the ease of purchasing tickets can lead to excessive spending, and if you continue to buy them every month, your debts can mount quickly. A good rule of thumb is to invest your money in stocks, bonds, or mutual funds instead. Those who play responsibly can enjoy the occasional prize, but should avoid the temptation to buy a ticket if they’re in over their heads in debt.
Claiming a prize
If you’ve won a prize in the lottery, you’re probably wondering how to claim it. First of all, the winning ticket must be original, not a photocopy. The Lottery reserves the right to demand the original ticket if you send in your claim by mail. Also, winning tickets can only be claimed once, so don’t make the mistake of photocopying it. Once you do this, the ticket will no longer be valid for prize payment.
If you’ve won a prize in a group lottery, you’ll need to bring at least two forms of identification to prove your ownership. One of these must be a photo ID, and the other must be signed. Other valid forms of identification include a driver’s license, Social Security card, passport, or state ID. For example, a work ID needs to have both a photo and signature to be valid.