Lottery Winners Face Unexpected Taxes
The lucky winner of last weekends Powerball jackpot now has to worry about the taxes they’ll be paying on the prize money.
Thanks to the fiscal cliff legislation and a number of state taxes, lottery winners will find themselves paying huge taxes on their jackpots.
High earners in America are facing a tax rise this year thanks to the new top tax bracket introduced as part of the fiscal cliff legislation. There are also new taxes being imposed by the Affordable Care Act. This means that the lottery winner will quickly be facing a huge amount of taxes.
Matthew Goff, a financial adviser in Houston, says that “Until we seriously address the spending side in government, there’s just going to be additional pressure for tax rates to go up.” As a result, lottery winners are probably better off taking the lump sum prize rather than spreading their winnings over time.
Which state the ticket is purchased in also changes the size of the prize. Some states will charge both residents and non-residents state-level income tax on the winnings, while others don’t.
For instance, in New York anyone who wins the lottery has to pay an 8.82% New York state tax and a 3.88% New York City tax. By contrast someone who wins in Florida wouldn’t have to pay any state taxes.
