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Winning and Moving to Income Tax Free State

Topic closed. 21 replies. Last post 8 years ago by Guru101.

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Would you move to an income tax free state before claiming a jackpot?

Yes [ 16 ]  [33.33%]
No [ 17 ]  [35.42%]
Already live in one [ 8 ]  [16.67%]
Unsure [ 7 ]  [14.58%]
Total Valid Votes [ 48 ]  
Discarded Votes [ 4 ]  
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Delaware
United States
Member #30273
January 14, 2006
494 Posts
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Posted: December 17, 2006, 1:08 am - IP Logged

If you suddenly won Powerball or Mega Millions, and your ticket came from a state that doesn't tax their own lotteries (CA, DC non-residents, DE, NJ, PA, WV non-residents), or a state with no income tax (FL, NH, SD, TN, TX, WA), would you first move to one of the 9 tax free states before claiming the jackpot?

    justxploring's avatar - villiarna
    Wandering Aimlessly
    United States
    Member #25360
    November 5, 2005
    4458 Posts
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    Posted: December 17, 2006, 3:42 am - IP Logged

    It would not make a difference. 

      Coin Toss's avatar - shape barbed.jpg
      Zeta Reticuli Star System
      United States
      Member #30470
      January 17, 2006
      9213 Posts
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      Posted: December 17, 2006, 2:42 pm - IP Logged

      Yeah, I think that's right. It's all going to be based on your residence when you won, not when you decided to claim the prize.

      "But I've lived her three months now".

      "Interesting, the jackpot you won was from a drawing four months ago." 

       PS

      The difference between tax avoidance and tax evasion?

      About 10 to 15 years. 

      Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

      Lep

      There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

        Raven62's avatar - binary
        New Jersey
        United States
        Member #17843
        June 28, 2005
        17937 Posts
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        Posted: December 17, 2006, 3:13 pm - IP Logged

        You need to move to one of the 9 Tax Free States (establish Residency (takes 6 months)) before playing the Lottery, NOT after you've WON!

        A mind once stretched by a new idea never returns to its original dimensions!

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          iowa
          United States
          Member #32899
          February 16, 2006
          46 Posts
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          Posted: December 17, 2006, 4:04 pm - IP Logged

          I could be wrong about this(I'm not a tax lawyer), but I think it actually has to do with the state you bought the ticket in. For example, I live in Iowa but if I drive to Illinois and win the mega millions, I would be taxed on Illinois rates. That I know is a fact, because it was a question answered by a lottery official.

            Avatar
            California
            United States
            Member #46824
            October 1, 2006
            270 Posts
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            Posted: December 17, 2006, 4:04 pm - IP Logged


            From the State of California web Site:

            "A California resident is an individual who is in California for other than temporary reasons. A resident is an individual who is working, living, retiring or staying in California for a long period.".

            It looks like you could win as a visitor and then move to California and claim your prize as a resident.  There is no time limit to become a resident, just you be here for other then temporary reasons.  Once you move here, you are a resident.

            Don't know how this would fly with the state that you left from a tax standpoint!

              Todd's avatar - Cylon 2.gif
              Chief Bottle Washer
              New Jersey
              United States
              Member #1
              May 31, 2000
              21652 Posts
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              Posted: December 17, 2006, 6:43 pm - IP Logged

              I could be wrong about this(I'm not a tax lawyer), but I think it actually has to do with the state you bought the ticket in. For example, I live in Iowa but if I drive to Illinois and win the mega millions, I would be taxed on Illinois rates. That I know is a fact, because it was a question answered by a lottery official.

              That is correct.

              Here's a glance at some various scenarios to show how you would pay your state tax if you live in one state and buy your ticket in a different state.  These guideline will generally be correct, although it is feasible that there may be exceptions here and there.

               

              Taxes in Your
              State of Residence 

              Taxes Where
              Ticket is Bought  

              Who do you pay state taxes to? 

              5%

              No state tax 

              5% paid to state of residence 

              5% 

              5% 

              5% paid to state of residence 

              5% 

              7% 

              5% paid to state of residence
              2% paid to state where bought 

              No state tax 

              5% 

              5% paid to state where bought 

              No state tax

              No state tax

              No state tax!

               

              Check the State Lottery Report Card
              What grade did your lottery earn?

               

              Sign the Petition for True Lottery Drawings
              Help eliminate computerized drawings!

                Tenaj's avatar - michellea
                Charlotte NC
                United States
                Member #17406
                June 18, 2005
                4036 Posts
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                Posted: December 17, 2006, 6:55 pm - IP Logged

                What?If you live in NC and buy your ticket in NC you pay taxes in both states.  That's why I can't understand why people drive to SC for SC's scratch offs (NC scratch offs is bad) and get a Powerball ticket while they are down there.  Why pay taxes in both states if you don't have too.  I can see it if we didn't have Powerball.

                Maybe it's like not caring about cash or annunity.  Just let me win.  Maybe they think their luck is in SC.

                takeemtothebank

                  Todd's avatar - Cylon 2.gif
                  Chief Bottle Washer
                  New Jersey
                  United States
                  Member #1
                  May 31, 2000
                  21652 Posts
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                  Posted: December 17, 2006, 9:33 pm - IP Logged

                  What?If you live in NC and buy your ticket in NC you pay taxes in both states.  That's why I can't understand why people drive to SC for SC's scratch offs (NC scratch offs is bad) and get a Powerball ticket while they are down there.  Why pay taxes in both states if you don't have too.  I can see it if we didn't have Powerball.

                  Maybe it's like not caring about cash or annunity.  Just let me win.  Maybe they think their luck is in SC.

                  I think you meant to say "...buy your ticket in SC..."

                  I do not believe you are correct.  Both states have a 7% state tax on lottery prizes, so according to my information you would pay 7% to North Carolina only, or if you paid it to S.C., you would not owe N.C. taxes on the prize.

                  Most border states (maybe all border states) have tax agreements on how to handle these things.

                  The situation is the same as it is for regular income, if you lived in N.C. and worked in S.C.:  S.C. may withhold taxes during the year, but at tax time you would file for a refund from S.C. and pay N.C. -- you would not pay income tax to both states.  (Unless one is higher than the other, but in this case they're the same.)

                  My chart above showing tax scenarios is the bottom-line.  You may have one state withholding or the other during the year, but at the end of the tax year when all is said and done, my chart shows what the net tax payment would be for you.

                   

                  Check the State Lottery Report Card
                  What grade did your lottery earn?

                   

                  Sign the Petition for True Lottery Drawings
                  Help eliminate computerized drawings!

                    wpb's avatar - DiscoBallGlowing
                    Charlotte North Carolina
                    United States
                    Member #464
                    July 9, 2002
                    16935 Posts
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                    Posted: December 17, 2006, 9:38 pm - IP Logged

                    What?If you live in NC and buy your ticket in NC you pay taxes in both states.  That's why I can't understand why people drive to SC for SC's scratch offs (NC scratch offs is bad) and get a Powerball ticket while they are down there.  Why pay taxes in both states if you don't have too.  I can see it if we didn't have Powerball.

                    Maybe it's like not caring about cash or annunity.  Just let me win.  Maybe they think their luck is in SC.

                    If you live in NC and buy a winning Scratch off in SC, SC will take taxes out of your winning, but NC will give you a credit for the Taxes paid in SC.  NC will tax your winning by adding it to your income which will increase your taxes.    I am not sure when this was changed but it use to be if you did not live in the state you won in, you would file a tax form and receive all of the taxes you paid in that state.  Now your state gives you a credit  and you do not have to file a tax form in the state that you do not live.

                    wpb

                      Tenaj's avatar - michellea
                      Charlotte NC
                      United States
                      Member #17406
                      June 18, 2005
                      4036 Posts
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                      Posted: December 17, 2006, 9:45 pm - IP Logged

                      If you live in NC and buy a winning Scratch off in SC, SC will take taxes out of your winning, but NC will give you a credit for the Taxes paid in SC.  NC will tax your winning by adding it to your income which will increase your taxes.    I am not sure when this was changed but it use to be if you did not live in the state you won in, you would file a tax form and receive all of the taxes you paid in that state.  Now your state gives you a credit  and you do not have to file a tax form in the state that you do not live.

                      SmileThanks for the update wpb.  It's helps that you can get a credit for SC.

                      takeemtothebank

                        guesser's avatar - Lottery-017.jpg

                        United States
                        Member #41383
                        June 16, 2006
                        1969 Posts
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                        Posted: December 18, 2006, 12:37 am - IP Logged

                        I could be wrong about this(I'm not a tax lawyer), but I think it actually has to do with the state you bought the ticket in. For example, I live in Iowa but if I drive to Illinois and win the mega millions, I would be taxed on Illinois rates. That I know is a fact, because it was a question answered by a lottery official.

                        I was told the same thing by a Kansas official.

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                          Delaware
                          United States
                          Member #30273
                          January 14, 2006
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                          Posted: December 18, 2006, 2:13 am - IP Logged

                          You would be taxed by both the state in which you purchase the ticket and the state in which you live. The state in which you live would grant a credit in some form or another, not necessarily on the entire tax paid. States like New York and Delaware use apportioning to determine taxable income. This means non-residents calculate their tax as if they are residents, then multiply it by a percent determined from state income vs. total income. Residents of such states would use a similar method to determine how much of the out-of-state tax can be taken as a credit (it will be the lesser of the apportioned percent or the actual tax paid, whichever is less). This gets more complicated when you factor in that some states will require you to refigure what your tax would be in other states based on your home state rules (Pennsylvania does this). This means is something is taxable in one state (social security income), but not in your home state, you need to recalcuate the other state's apportioned return without social security income included, and use that result for determining the credit. Confused yet?


                            United States
                            Member #9579
                            December 12, 2004
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                            Posted: December 18, 2006, 1:03 pm - IP Logged

                            don't have to worry about that,i don't live in a red state,so will not win anyway!


                              United States
                              Member #16612
                              June 2, 2005
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                              Posted: December 18, 2006, 7:40 pm - IP Logged

                              My vote is yes because I don't want to pay income tax.