FAQs on Lottery & Taxes

Do I have to pay tax on my Winnings?

Yes, you are subject to the tax rules where you live, and taxes where the lottery is being held, if it is different from where you live. No US-based lottery will pay out any winnings without first deducting the taxes due on those winnings - usually, a full 38%. US lottery winnings are taxable, as are ALL lottery wins over $600, anywhere in the world, if the player is a US citizen.

How does the lottery compare to other gambling ventures?

The state lotteries typically take about a 40% share of all gambling revenues. This is way above other gambling choices. Most casinos take anywhere from 1-6% on all their games. You can get more bang for your gambling buck by going to a casino- and you'll have more fun too.

The lottery is a rip-off. The odds of winning the lottery are incredibly bad. Consider the following facts: Powerball is drawn twice a week. The odds of winning are 120,526,770 to 1. If you lived to be 77 years old (a normal life expectancy), then you would have to buy 15,050 tickets for EACH drawing (30,100 tickets each week) in order to have a 1 to 1 chance of winning.

Even winning the lottery is not as great as the government advertises because of 3 reasons. First, if you pick a payment plan you don't make interest on the money, the government does. Second, you have to pay big taxes on your winnings. And third, the inflation eats away a lot of the money you get in the future.

Have state governments been increasing their gambling revenues in the last few years to cover budget shortfalls?

The state lottery is a tax. The state takes about 35-40 cents out of every dollar bet on the lottery and redistributes the money as it sees fit.

Is this a good idea? I mean, if I can have fun and potentially win money, then isn't that better than just paying a tax?

Considering that the lottery is a tax (and therefore a redistribution of wealth) and that the lottery is also played more often by poor people then the lottery tax is a regressive tax, which means poor people are taxed at ahigher rate. Every single study shows this. Some people will make the argument that poor people don't have to gamble and therefore don't have to lose money to this tax. But gambling is a form of entertainment which people of all classes take part in. There is nothing wrong with this. Gambling, in moderation, in entertainging and fun. The problem arises when rich people can gamble at much better odds in Las Vegas where they only lose about 1-6% (before comps) of their money instead of the 40% poor people lose because they are too poor to travel to Las Vegas. Lottery taxes are also known to be the most unstable source of government revenues so if the economy were to decline then gambling revnues could decline too.

source: http://www.homepokergames.com/lotterytax.php