Tax Planning How Your Lottery Winnings Are Taxed Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by TurboTaxLisa Modified Mar 5, 2020 2 min read Winning a large Lottery Jackpot is a dream come true for many! Everyone scrambles around to get last minute tickets and hoping 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 sizeable jackpots are taxed at the new maximum federal rate of 37%, which is down from 39.6% due to tax reform. That means if you take your 1.6 billion Mega Millions winnings all at once instead of over 30 years, the estimated $904 million cash payout will automatically be taxed at 24% ($217 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 CPA or Enrolled Agent to get your tax questions answered. A TurboTax Live CPA or Enrolled Agent can even review, sign, and file your tax return. Previous Post Six Tips to Beat the October 15th Extended Tax Deadline Next Post 10 Consejos de Fin-De-Año Para Aumentar Tu Reembolso de Impuestos Written by 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 Follow Lisa Greene-Lewis on Twitter. One response to “How Your Lottery Winnings Are Taxed” I won $229,000 in a Florida Fantasy 5 and $54,000 was taken out already in federal taxes. I know additional taxes will have to be paid when I file but I’m trying to calculate how much. I file married jointly and combined income is around $160,000 for the year. I also purchased a house with the winnings. So I there will be a lot of figures going into play when it’s time to file. I’m just trying to get a hint as to how much I need to have set aside to pay Uncle Sam again. I’m assuming around $10k-$20k. Reply Leave a Reply Cancel reply Browse Related Articles Tax Planning Cashing Out: Lottery Winnings After Taxes Life Lottery Calculator Tax Tips Summertime – Gambling – the IRS? Income and Investments Sports Gambling and How Your Winnings are Taxed Taxes 101 Top Fun #TaxFacts You Need to Know Tax News Oscars and the Taxation of “Swag Bags” Income and Investments Gambling Winnings Tax (How Much You Will Pay For Winnin… Tax Tips 1098 vs 1099 forms Explained (Difference Between These … Income and Investments How Do Game Show Winnings Affect Your Taxes?