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Paying taxes on your lottery winnings

Topic closed. 11 replies. Last post 11 years ago by Todd.

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RJOh's avatar - chipmunk
mid-Ohio
United States
Member #9
March 24, 2001
17874 Posts
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Posted: April 5, 2003, 3:24 pm - IP Logged

While filling out my federal taxes, I was suprised to learn that the expense of buying  lottery tickets greater the amount you win can't be deducted from your taxable winnings unless you are a professional gambler, otherwise you may only itemizes losses up to the amout you win.  If you get a form W-2G, you have to file those winnings as income.  So if during the year you buy $3000 worth of lottery tickets and win $1500, you can only deduct $1500 as a loss and if your total itemized deductions is less than the standard deductions plus $1500,  you will pay taxes on $1500 as additional income in spite of the fact that your overall gain was minus $1500.  So if you win $1500 in the lottery and bought more than $1500 worth of tickets, either you are a professional gambler or you are a loser.

RJOh 


    United States
    Member #379
    June 5, 2002
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    Posted: April 5, 2003, 3:32 pm - IP Logged
    RJ:

    If only this were Canada-all prizes TAX-FREE, and LUMP SUM (although there are now "win for life" scratch games, where the interest on the payments after the initial "cheque" are taxable).

      RJOh's avatar - chipmunk
      mid-Ohio
      United States
      Member #9
      March 24, 2001
      17874 Posts
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      Posted: April 5, 2003, 6:02 pm - IP Logged

      It just that I confused lottery winnings with lottery profits.  The aveage lottery player can not make a profit from playing the lottery unless he wins more than he spent on all his lottery tickets otherwise he is just adding to his taxable income if he wins anything.  As a professional I will only pay taxes on my profits(lottery winnings minus cost of all lottery tickets) as reported on schedule C.

      RJOh

        visiondude's avatar - eye3logo
        light on my feet
        United States
        Member #356
        May 20, 2002
        2744 Posts
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        Posted: April 6, 2003, 12:18 am - IP Logged

        cash (or anyone else), dumb question #1



        if a citizen of the united states crosses the border and buys a lottery ticket in canada and WINS, does the person who won still have to pay taxes on their win here in the U.S.?



        dumb question #2

        what if the same person won and then moved to canada immediately, would they STILL have to pay taxes here in this country?



        dumb question #3

        if they have to pay taxes, approx how much?

        VDQPLS

                    "i am .........."meant to"       

        P.S.,  that RJoH  is a stand up guy.  thanks,  vision

                 until further notice,  it's  france everyday

          Thomas Covenant's avatar - money
          South Carolina
          United States
          Member #491
          July 16, 2002
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          Posted: April 6, 2003, 1:32 am - IP Logged

          Answer to question # 1.

          Yes, the USA taxes all income from it's citzens, it doesn't matter where the income is from.



          Answer to question # 2.

          Even if you give up your USA citizenship, the USA can and will tax you on all USA based income for up to ten years.



          Answer to question # 3.

          The standard 38 percent. Plus whatever state and local taxes.




          Okay, now I believe you can predict lottery numbers

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            United States
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            June 30, 2002
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            Posted: April 6, 2003, 6:56 am - IP Logged

            Why does anyone even worry about taxes when it comes to the lottery? Chances are if you win $1500 it is not going to push you into another tax bracket. And even if it did and you had to pay more taxes you still have more money than you originally did.

            And if you manage to win PB or MM, you'll have so much that taxes will seem like a moot point (especially if you take the lump sum and only have to pay taxes on it once).

              hypersoniq's avatar - xls
              Pennsylvania
              United States
              Member #1340
              April 6, 2003
              2444 Posts
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              Posted: April 6, 2003, 9:35 am - IP Logged





               

               

              $10,000,000


               

               

              $201,333


               

               

              $3,020,000

              $11,000,000$221,467$3,322,000
              $12,000,000$241,600$3,624,000
              $13,000,000$261,733$3,926,000
              $14,000,000$281,867$4,228,000
              $15,000,000$302,000$4,530,000
              $16,000,000$322,133$4,832,000
              $17,000,000$342,267$5,134,000
              $18,000,000
                Todd's avatar - Cylon 2.gif
                Chief Bottle Washer
                New Jersey
                United States
                Member #1
                May 31, 2000
                21525 Posts
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                Posted: April 6, 2003, 10:34 am - IP Logged

                Rjoh,

                The deductable gambling formula applies for any type of gambling, not just lotteries.  It's a good idea to keep records of ALL gambling activities together, in case one of them happens to hit a good size prize during the year.  For example, if you spend $2,000 on lotteries during the year, and you hit a $5,000 prize on a slot machine, you can deduct your $2,000 lottery expenses from the $5,000, and only pay taxes on $3,000 of the prize.

                 

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

                 

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


                  United States
                  Member #379
                  June 5, 2002
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                  Posted: April 15, 2003, 5:55 am - IP Logged

                  Hope everybody wins enough to increase their tax liability next year (of course I prefer none of the winnings paid through annuities).

                    NY
                    United States
                    Member #1359
                    April 11, 2003
                    136 Posts
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                    Posted: April 15, 2003, 9:39 am - IP Logged

                    Being a CPA and once working for what used to be known as a Big 6 accounting firm, I fully back Todd's comment. 

                    I also back RJoh's comment above.  Lottery losses are only deductible up to the lottery winnings. 

                    Though lottery winnings are fully taxed, they are NOT taxed as earned income so therefore, SS taxes are NOT paid.

                    Some states like NJ do NOT tax on lottery winnings.

                    Hope all of you filed your taxes today!

                      megamillionaire's avatar - Sphere animated_small_ neg2.gif
                      Queens, NY
                      United States
                      Member #245
                      April 15, 2002
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                      Posted: April 15, 2003, 11:02 am - IP Logged

                      The 2002 maximum Federal tax is 38.6% on all amounts above $307,051. NY State tax is 6.5%. N.Y. City also has a tax I'm not sure what the % is.

                      Megamillionaire

                      Time is a wonderful teacher, but it kills all its students.

                      A man must consider what a rich realm he leaves when he becomes a conformist.

                        Todd's avatar - Cylon 2.gif
                        Chief Bottle Washer
                        New Jersey
                        United States
                        Member #1
                        May 31, 2000
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                        Posted: April 15, 2003, 11:20 am - IP Logged

                        Megamillionaire, although you have correctly stated the top-tier percentage rate, only someone blindly filing their taxes using the "simple form" with TurboTax would actually pay that much.  With the millions comes the ability to hire a good tax attorney, so I don't think I'd end up paying as much your example.

                         

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

                         

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