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Question to people who won over $600? are prizes cut in half?

Topic closed. 9 replies. Last post 5 years ago by iGlenn.

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United States
Member #54390
August 17, 2007
313 Posts
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Posted: March 17, 2009, 2:56 am - IP Logged

I have a question. Let's say that I win the Daily 4, Pick 5, state lottery or other big prizes.  I know they're taxed, but are the prizes cut in half like in the Mega Millions and Powerball? I know the Ohio state lottery, their prizes are cut.  Right now their state lottery prize is 16 million and it says "prize is 50% of the amount".

 

Let's say I win Pick 4 (prize is $5,000).

Do they cut it in half , take out taxes and only give you $1,725??  Or do they take the $5,000, take out taxes and pay you $3,450?

 

I'm also looking at this lotto scratch ticket where you can win $1,000,000. Is that cut in half as well?

    rustysmom's avatar - disney28
    ohio
    United States
    Member #706
    September 14, 2002
    400 Posts
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    Posted: March 17, 2009, 3:56 am - IP Logged

    I have a question. Let's say that I win the Daily 4, Pick 5, state lottery or other big prizes.  I know they're taxed, but are the prizes cut in half like in the Mega Millions and Powerball? I know the Ohio state lottery, their prizes are cut.  Right now their state lottery prize is 16 million and it says "prize is 50% of the amount".

     

    Let's say I win Pick 4 (prize is $5,000).

    Do they cut it in half , take out taxes and only give you $1,725??  Or do they take the $5,000, take out taxes and pay you $3,450?

     

    I'm also looking at this lotto scratch ticket where you can win $1,000,000. Is that cut in half as well?

    In Ohio it's only the jackpot amounts on mega millions and classic lottery. the lower tier prizes are not affected.I won $1500.00 a couple years ago on the classic lottery. I received the whole amount.

    on $5000.00 you would receive the $5000.00 and you pay the taxes when you file your income tax. over $5000.00 the tax would be taken out, but the amount would not be cut in half.

      dopey7719's avatar - Lottery-049.jpg
      Midlands, SC
      United States
      Member #69698
      January 14, 2009
      299 Posts
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      Posted: March 17, 2009, 5:47 am - IP Logged

      It depends on the state you live in.  In South Carolina, the federal government tax is 25% and our state tax is 7%.  So it's whatever prize it is minus 32% for us.  My cousin won 540.00 and ended up with a check for $367.  You can always call your local lottery office and ask them the tax percentage.  It's different in every state. 

      In SC, they automatically take out the state tax and for federal they let you chose to file it at the end of the year if it's less than 5000.00.  Otherwise, they take it out automatically if it's over 5000.00.....NOT to mention if you win over 5000.00 then they do a check for collections/judgements against you and pay your creditors before cutting you a check.  Especially defaulted student loans & the IRS....THEN you get the balance. 

      I've seen that happen in person at headquarters to a guy that won a lot on a scratch-off.  They told him that they would cut a check to his student loan company first since that came up in the (credit/background check) and then give him the balance.  He kept trying to convince them that he was making payment arrangements for the defaulted student loan and for them NOT to pay it,  but they said that the the law doesn't allow for that.  So if you owe student loans that are in default or the IRS...subtract that from your winnings over 5000.00 & the federal/state tax amount.  I thought he was going to start crying!!! 

      The way I see it is this:  At least the bill is out of the way.

        Raven62's avatar - binary
        New Jersey
        United States
        Member #17843
        June 28, 2005
        17937 Posts
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        Posted: March 17, 2009, 9:31 am - IP Logged

        Advertised Jackpot Game Prize Amounts are based on the Winner choosing the Annuity instead of Cash.

        The Lottery acts as the Agent for the Winner if they Choose Annuity: They take the Cash Amount and Purchase an Annuity for the  Advertised Jackpot Amount. (Time Value of Money) The Winner then Receives the Annuity and Pays Taxes Annually as they Receive the Annuity Payout.

        If the Winner chooses Cash: They receive the Cash Amount minus Taxes. (Cash Amount is usually 50% of the Annuity Amount)

        Annuity: A fixed annual allowance, esp. one provided by a form of investment.

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

          DC81's avatar - batman39
          MI
          United States
          Member #54830
          August 31, 2007
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          Posted: March 17, 2009, 12:44 pm - IP Logged

          I believe Mega Millions cash option has been around 65-70% over the last several months though thanks to the shorter annuity and how T-Bills were and are performing, but it's more because of the shorter annuity I think.

          For example, let's say MM is up to 100M annuity and the cash option is 65,000,000, now the initial Fedral Tax would be 25% and whatever your state income tax is, Michigan for example has a state income tax of 4.35% so that's 29.35% off the top of the cash option if you take that.

          100%-29.35% = 70.65%

          65,000,000*.7065 = 45,922,500 = 45.922500% if the advertised annuity after taking the cash and the initial taxes. Of course then you might be liable for another 10% Federal taxes at tax time which would mean another $6,500,000 going to drunken Uncle Sam. Though you could probably reduce that by quite a bit if you know what you're doing or hire someone who does. But off the top that's roughly percentage of the annuity you would end up with with MM. It's easy enough to apply that to other lotteries as well.

          You can't predict random.

            charmed7's avatar - Lottery-013.jpg
            MICHIGAN
            United States
            Member #65282
            September 22, 2008
            1854 Posts
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            Posted: March 17, 2009, 12:53 pm - IP Logged

            In MI, you receive the whole amount, U pay taxes on the money at the

            end of the year, when u file your taxes.   St. Patty's Fiddlewould nice if

            we could throw in a bucket like this guy, and avoid taxes altogether!

            (in my dreams)!

              OldSchoolPa's avatar - Lottery-057.jpg
              Gurnee, Illinois
              United States
              Member #49731
              February 12, 2007
              840 Posts
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              Posted: March 17, 2009, 1:05 pm - IP Logged

              I have a question. Let's say that I win the Daily 4, Pick 5, state lottery or other big prizes.  I know they're taxed, but are the prizes cut in half like in the Mega Millions and Powerball? I know the Ohio state lottery, their prizes are cut.  Right now their state lottery prize is 16 million and it says "prize is 50% of the amount".

               

              Let's say I win Pick 4 (prize is $5,000).

              Do they cut it in half , take out taxes and only give you $1,725??  Or do they take the $5,000, take out taxes and pay you $3,450?

               

              I'm also looking at this lotto scratch ticket where you can win $1,000,000. Is that cut in half as well?

              To answer your specific question, the answer is no and yes.  Typically, Pick 5 and below games (Pick 4, Pick 3) are cash value games meaning whatever the advertised jackpot is the available cash winnings.  Pick 6 games to include state lotteries, as well as Pick 5 + 1 games like MM and PB are advertised as annuitized jackpot games...meaning you only get that advertised amount if you choose the annuity option.  The underlying cash value funding that annuity can range from 40 - 60% depending on the payout terms and other factors.  If you choose the cash value option, it is this underlying amount you would receive (if you win).  Your best bet if you have any questions about any of the lottery games is to visit the particular website of the game you are interested in playing.  Also the reverse side of the playslips contain pertinent useful information (though not the complete information due to space limitations).

              Can't help you with scratch ifs...the terms vary from state to state.  Some are annuitized prizes whereas others may be cash lump sum amount.  I never bothered to check into all the states as scratch if games don't really interest me.

              Get MONEY!!! Winning a JACKPOT lottery is all the HOPE and CHANGE I desire!!!  NOW give me MONEY!US Flag

              The guy who won the presidency in 2008 really won the lottery...he is now millions richer, travels in first class style, and even has a staff that would be the envy of the richest Powerball winner (she has a staff of 2). Every night he goes to sleep, he probably plays the close of Dave Chappelle's Show: I'm rich beyatch!

                justxploring's avatar - villiarna
                Wandering Aimlessly
                United States
                Member #25360
                November 5, 2005
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                Posted: March 17, 2009, 1:11 pm - IP Logged

                As others have answered, usually only jackpots have a lower cash value, since the advertised jackpot is based on the value of the annuity in 20 or 30 years.  However, you always need to check the rules for each game.  For example, PB has a second prize of $1 million and you win $1 million (less tax, of course.)  But some of the scratch-off games in FL pay the second prize in installments, like the Billion Dollar Blockbuster game.  The top prize is $10 million paid out in 20 installments, but the second prize (which is $1 million) is also paid out over 20 years.  Sometimes there is still a cash option. 

                Regarding the percentage of the payout, it depends on the interest rate at the time and the length of the term.  If a cash option is offered, a 20 year annuity will pay considerably more than a 30 year annuity.  This is because they pay the amount that would have to be invested to reach the jackpot during that term.

                Pick 3 and pick 4 games (as far as I know) never reduce the amount of the prize, except for state & federal taxes.  Again, it depends on the rules established for that particular game.  Last year we had a "Gas For Life" game which was not a scratch-off.  It was an online game and the grand prize was $50,000.   When I read the newspaper, a local man won and got a lump sum payment of $37,000 (about 74%) from the lottery, less tax.

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                  United States
                  Member #54390
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                  Posted: March 19, 2009, 3:50 am - IP Logged

                  As others have answered, usually only jackpots have a lower cash value, since the advertised jackpot is based on the value of the annuity in 20 or 30 years.  However, you always need to check the rules for each game.  For example, PB has a second prize of $1 million and you win $1 million (less tax, of course.)  But some of the scratch-off games in FL pay the second prize in installments, like the Billion Dollar Blockbuster game.  The top prize is $10 million paid out in 20 installments, but the second prize (which is $1 million) is also paid out over 20 years.  Sometimes there is still a cash option. 

                  Regarding the percentage of the payout, it depends on the interest rate at the time and the length of the term.  If a cash option is offered, a 20 year annuity will pay considerably more than a 30 year annuity.  This is because they pay the amount that would have to be invested to reach the jackpot during that term.

                  Pick 3 and pick 4 games (as far as I know) never reduce the amount of the prize, except for state & federal taxes.  Again, it depends on the rules established for that particular game.  Last year we had a "Gas For Life" game which was not a scratch-off.  It was an online game and the grand prize was $50,000.   When I read the newspaper, a local man won and got a lump sum payment of $37,000 (about 74%) from the lottery, less tax.

                  Thanks for the help guys. I can sleep comfortably on my bed now.

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                    United States
                    Member #61232
                    May 16, 2008
                    126 Posts
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                    Posted: March 19, 2009, 6:37 pm - IP Logged

                    Thanks for the help guys. I can sleep comfortably on my bed now.

                    So how much did you win?  Hurray!