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PA resident winning lottery in NJ - Taxes

Topic closed. 21 replies. Last post 5 months ago by winningin2016.

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Posted: July 13, 2016, 4:04 pm - IP Logged

I live in PA (primary residence).  Say I won the lottery (scratch off for over 100k) in NJ.  Would I need to pay income tax in both NJ & PA and just PA?  If so, what kind of damage am I looking at?

    Raven62's avatar - binary
    New Jersey
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    Posted: July 13, 2016, 4:53 pm - IP Logged

    I live in PA (primary residence).  Say I won the lottery (scratch off for over 100k) in NJ.  Would I need to pay income tax in both NJ & PA and just PA?  If so, what kind of damage am I looking at?

    No! Just PA!

    https://revenue-pa.custhelp.com/app/answers/list/search/1/kw/reporting%20gambling%20winnings%20from%20NJ/suggested/1

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

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      Posted: July 13, 2016, 5:04 pm - IP Logged

      So NJ isn't going to wack me for 5% or 8%?

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        Posted: July 13, 2016, 5:32 pm - IP Logged

        So NJ isn't going to wack me for 5% or 8%?

        You pay the standard 25% and the state tax for which the ticket BELONGS to. Not the state you live in.

        So if your ticket says NEW JERSEY Lottery then you pay New Jersey

        Some have different tax rates for out of states residents, but those are rare.

          LiveInGreenBay's avatar - driver
          Green Bay
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          Posted: July 13, 2016, 5:37 pm - IP Logged

          I think its funny how some people worry about the tax implications before they win.  Win first, then worry.  It is what it is.

          Never give up.  Banana

            Raven62's avatar - binary
            New Jersey
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            Posted: July 13, 2016, 5:38 pm - IP Logged

            So NJ isn't going to wack me for 5% or 8%?

            No! Reciprocal States! PA doesn't Tax you if you Win in PA, but if you Win Out-Of-State they Tax you on the Winning and the Reciprocal State (NJ) Doesn't Tax You!

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

              Raven62's avatar - binary
              New Jersey
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              Posted: July 13, 2016, 5:41 pm - IP Logged

              I think its funny how some people worry about the tax implications before they win.  Win first, then worry.  It is what it is.

              As They Say: Plan Ahead!

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

                Deo-nonfortuna's avatar - hqdefault
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                Posted: July 13, 2016, 5:43 pm - IP Logged

                I think its funny how some people worry about the tax implications before they win.  Win first, then worry.  It is what it is.

                LP is full of people who worry about what to do with their imaginary MM PB jackpot win, some even go as far as worrying about how to stay anonymous. LOL. No kidding, win first and then worry about what to do next.

                All things which are similar and therefore connected, are drawn to each other's power.

                  grwurston's avatar - 144
                  Let's Go Rangers!!!
                  bel air maryland
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                  Posted: July 13, 2016, 5:43 pm - IP Logged

                  I live in PA (primary residence).  Say I won the lottery (scratch off for over 100k) in NJ.  Would I need to pay income tax in both NJ & PA and just PA?  If so, what kind of damage am I looking at?

                  Are lottery prizes taxable?

                  Lottery winnings of $600.01 and over are subject to Federal Withholding tax.  For winnings of $600.01, up to and including $5,000, you will be issued a W-2G form to report your winnings on your federal income tax form.  For winnings of $5,000.01 and over, your state's Department of Revenue removes the 25 percent federal withholding before you receive your winnings check (or, if it is an annuity, from each winnings check).  You then receive a W-2G form with each check to submit with your 1040 form to show that the 25 percent federal withholding already has been paid.  In addition to federal tax, your state will make additional withholdings for taxes, and most states will deduct other money that you may owe to the state, such as back taxes, child support, loan payments, etc.  In addition, like the federal tax withholding, the state tax withholding at the time of prize payout may not be the total state tax owed at the end of the year.  You must consult your state division of taxation for more information about the total state tax requirements for lottery winners.

                  The state tax withholdings are as follows:

                  Arizona 5% state withholding (Arizona residents), 6% state withholding (non-Arizona residents)
                  Arkansas 7% state withholding
                  California No state tax on lottery prizes
                  Colorado 4% state withholding
                  Connecticut 6.99% state withholding
                  Delaware No state tax on lottery prizes
                  Florida No state tax on lottery prizes
                  Georgia 6% state withholding
                  Idaho 7.4% state withholding
                  Illinois 3.75% state withholding
                  Indiana 3.4% state withholding
                  Iowa 5% state withholding
                  Kansas 5% state withholding
                  Kentucky 6% state withholding
                  Louisiana 5% state withholding
                  Maine 5% state withholding
                  Maryland 8.75% state withholding (Maryland residents), 7.5% state withholding (non-Maryland residents)
                  Massachusetts 5% state withholding
                  Michigan 4.25% state withholding
                  Minnesota 7.25% state withholding
                  Missouri 4% state withholding
                  Montana 6.9% state withholding
                  Nebraska 5% state withholding
                  New Hampshire No state tax on lottery prizes
                  New Jersey 8% state withholding
                  New Mexico 6% state withholding
                  New York 8.82% state withholding, plus: 3.876% (NYC residents), 1.323% (Yonkers residents)
                  North Carolina 5.75% state withholding
                  North Dakota 2.9% state withholding
                  Ohio 4% state withholding
                  Oklahoma 4% state withholding
                  Oregon 8% state withholding
                  Pennsylvania No state tax on lottery prizes
                  Rhode Island 5.99% state withholding
                  South Carolina 7% state withholding
                  South Dakota No state tax on lottery prizes
                  Tennessee No state tax on lottery prizes
                  Texas No state tax on lottery prizes
                  U.S. Virgin Islands  Unknown State Tax Rate
                  Vermont 6% state withholding
                  Virginia 4% state withholding
                  Washington No state tax on lottery prizes
                  Washington, D.C. 8.5% state withholding
                  West Virginia 6.5% state withholding
                  Wisconsin 7.75% state withholding
                  Wyoming No state tax on lottery prizes

                  † This state/jurisdiction has not responded to our requests for this information.

                  If I live in a state that taxes prizes, but bought my ticket in a state with no tax on prizes, do I still need to pay state tax?

                  Yes, you do.  Think of lottery prizes as regular earned income from a job.  Just because you may work in a different state, that doesn't permit you to get away with not paying state income tax in your state of residence.  The lottery works the same way.

                  Whether it's income from a job or income from gambling, the state where the money is won will tax the prize first at their out-of-state tax rate (assuming the state taxes lottery winnings).  If your state of residence has the same or lower tax rate, then you won't owe anything else.  But if your state has a higher rate, you will get a credit for what you paid in the other state, and pay the difference to your state.

                  If the other state has no tax, you just pay the entire tax bill to your state.

                  The net result is that you end up paying whichever tax rate is higher between your state of residence and the state where you purchased the ticket.  Of course, the tax law is quite complex and it's possible that some condition or arrangement exists between the two states and a good tax attorney and/or accountant could discover a tax-saving loophole.  That's why we always recommend that major prize winners do not make any major decisions before first hiring a good legal and financial team.

                  One other option to consider, depending on how much in taxes you're looking to save: the residency requirements as they relate to prize claims, state taxes, and income reporting.  Since you aren't responsible for paying taxes until you claim the prize, perhaps there is time to establish residency in the state where you purchased the ticket before the prize claim period expires.  However, that is something you would definitely need to explore with an attorney before taking any action to assess the feasibility.  You would also need to decide if it would be worth the risk of that important little piece of paper not getting lost, damaged, or destroyed in the time you spend arranging everything.

                  "You can observe a lot just by watching." Yogi Berra, Hall of Fame baseball player.

                  The numbers will tell you what numbers to play. Pay attention to the numbers.

                  Don't just think outside the box, crush it.

                    Deo-nonfortuna's avatar - hqdefault
                    NJ
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                    Posted: July 13, 2016, 5:51 pm - IP Logged

                    So NJ isn't going to wack me for 5% or 8%?

                    Yea, I was told that u will have to pay taxes in both states. Do what I do, got a family member or a friend u can trust in NJ? Let them cash it in for u to avoid PA tax. Or just play PA scratch-offs and get state tax-free cash.

                    All things which are similar and therefore connected, are drawn to each other's power.

                      HoLeeKau's avatar - YheaShea
                      Idaho
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                      Posted: July 13, 2016, 6:12 pm - IP Logged

                      I live in PA (primary residence).  Say I won the lottery (scratch off for over 100k) in NJ.  Would I need to pay income tax in both NJ & PA and just PA?  If so, what kind of damage am I looking at?

                      It doesn't look like PA taxes lottery.  But I'm pretty sure you'd have to pay the 8% NJ tax.

                        Deo-nonfortuna's avatar - hqdefault
                        NJ
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                        Posted: July 13, 2016, 6:17 pm - IP Logged

                        It doesn't look like PA taxes lottery.  But I'm pretty sure you'd have to pay the 8% NJ tax.

                        PA doesn't if u buy PA tickets, but I heard u still have to pay tax if u win from other states. I am not sure, but I get my friends to cash them in for me just to be safe.

                        All things which are similar and therefore connected, are drawn to each other's power.

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                          South Carolina
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                          Posted: July 13, 2016, 7:48 pm - IP Logged

                          I live in PA (primary residence).  Say I won the lottery (scratch off for over 100k) in NJ.  Would I need to pay income tax in both NJ & PA and just PA?  If so, what kind of damage am I looking at?

                          Pennsylvania >>> No State taxes on Lottery Prizes

                          New Jersey >>>  8% State Withholding Tax

                          In this scenario, you would have to pay Federal Income Tax, and 8% New Jersey State Income Tax, and no Pennsylvania State Tax, b/c your state of residence does Not tax Lottery Prizes.

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                            NY
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                            Posted: July 13, 2016, 9:46 pm - IP Logged

                            Pennsylvania doesn't tax winnings from its own lottery,  but other gambling income, including income from other lotteries is taxable. Since PA's rate is lower than any other state the taxes paid to the state where the winning ticket was bought will normally offset the taxes that would otherwise be owed to PA. If a PA resident won a prize in a state that has no state income tax  or that doesn't tax winnings from their lottery then there would be no payments to a different state and the winner would owe PA tax.

                            The withholding rate in NJ is 8%, but the maximum tax rate was bumped up to almost 11% a couple of years ago. As with other income that top rate doesn't apply to all lottery winnings, so smaller prizes won't pay that much.

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                              Kentucky
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                              Posted: July 13, 2016, 10:50 pm - IP Logged

                              LP is full of people who worry about what to do with their imaginary MM PB jackpot win, some even go as far as worrying about how to stay anonymous. LOL. No kidding, win first and then worry about what to do next.

                              I Agree!

                              Worrying about imaginary jackpots is one thing, but some of the same people are very critical of when and how real winners collect and spend their winnings.