Lottery Tax Calculator: What Percent Of Taxes Do You Pay If You Win The Lottery!
There’s no doubt winning a lottery or being showered with a sudden windfall is as exciting as a 4-year old having their favorite ice cream! But surely the 4-year old’s excitement is not as short-lived as yours! Though you’ve won a huge sum of money and you have started imagining a problem-free life full of luxuries, the reality remains as hard as ice! You have Not bagged the Advertised Lottery Jackpot! Neither should you be too quick in spending the amount you have received as part of your grand win.
Because lottery winnings are considered as ordinary taxable income by both Federal and State tax authorities. Winnings are taxed at the same amount as wages or salaries are!. The total winning amount the player receives must be reported on their return for that particular year. Before you, as a winner, receive any of the newfound wealth, the IRS automatically deducts 24% of the winnings in addition to as much as 13% of the state taxes. There are few state lotteries that do not levy an individual income tax including, Florida, New Hampshire, Tennessee, Texas, South Dakota, Washington, and Wyoming. While there are few like California and Delaware state lottery that do not pose any lottery taxes.
And, to understand these complicated lottery tax calculations, you need to get your hands on a lottery tax calculator and hire a financial advisor to get some help over tax and investment strategies. But before that, why not we help you with some basic information on lottery winning taxation so that you don’t end up getting scammed and handle the wealth rather diligently.
How Are Your Lottery Winnings Taxed Under Federal and State?
Ok, so the IRS considers your lottery winnings as just ordinary taxable income. There’s no special tax bracket for such types of money received. So after deducting the cost of your ticket, the amount left is owed to Federal Income Taxes. How much percent of the federal income tax is levied, entirely depends on the amount of your winnings and other sources of income, this is why the IRS withholds only 25%. The rest you’ll have to mention while filing the tax return.
Let’s say you chose to receive your lottery winnings in the form of annuity payments and received $50,000 in 2022. So you must report that money as income on your 2022 tax return. The same applies if you pick the lump-sum payout option. You’ll have to report the entire amount received. And for this, you definitely need a lottery tax calculator.
It is important to note that before you receive a single penny, the IRS automatically takes away 25 percent of your winnings as tax money. And you’re expected to pay the rest of your tax bill on that money when you file your return.
What Is The Rate Of Tax Applied Lottery Winnings?
When it comes to taxes, lottery winnings are taxed according to the state’s federal tax brackets. This is why you don’t have to pay the same amount of tax on the entire prize money. The tax brackets are progressive, this means that different portions of your winnings are taxed at different rates. Depending on the amount of winnings, the lottery tax could be as high as 37 percent as discussed before! Whereas the state and local tax rates vary by location. There are some states that do not impose an income tax as mentioned above, while there are others that withhold over 15 percent. Also, there are some states that withhold tax rates for non-residents, meaning if you don’t reside there, you will still have to pay the taxes to that state.
Do You Have To Pay State Taxes On Lottery Winnings If I Don’t Live In The State From Where I Bought The Ticket?
Majority of the states do not withhold taxes for the lottery winners who don’t reside there. In fact, out of the 43 states that participate in multistate lotteries, only two of them withhold taxes from non-residents. Arizona and Maryland are the only states who pose taxes on lottery winnings of the people who live out of state.
Are You Or Will Be A Lucky Lottery Winner? Determine What Do You Have To Pay In Taxes With The Lottery Lab’s Tax Calculator!
Once you have the prize money in hand, the first question that should strike your mind is, how much money do you have to keep and how much the government will have? And to answer this most appropriately, The Lottery Lab Tax Calculator gives you an estimate of the final cash amount after the deductions that you will receive after you’ve entered the winning amount and the state in which you’ve won!
However, it is sincerely advised to calculate all your liabilities and taxes with the help of such tools before picking up that giant check rather than getting hit by heavy taxes and debt bills. Use effective and efficient lottery tools like tax calculators, winning tips and others to plan and manage your lottery winnings wisely and responsibly.
