Taxes on Lottery Winnings


While casting lots for decisions and determining fates has long been practiced, the modern lottery is relatively new. It was first introduced in the United States in 1967. New Hampshire’s positive experience encouraged other states to establish lotteries.

Many state lotteries offer a variety of prizes, including sports teams and famous celebrities. Some lotteries also use merchandising deals to boost sales.


Lottery is a game of chance that draws winners using a random method. It may involve mixing a pool of tickets or their counterfoils and selecting a winner by a mechanical device, such as shaking or tossing. The selection process must be completely random to ensure that chance determines the winners. In modern times, computers are used to randomly select the winning numbers or symbols.

The precise origin of lottery is unclear, but it was widely used in 15th and 16th century Europe to raise money for a variety of projects, including town fortifications and charity. The practice spread to the Americas, where it was popular among settlers because it allowed them to pay for construction and public services without having to pay taxes.

In the US, lottery proceeds helped fund Harvard, Yale and many other institutions. It also became a way for the colonial government to support its troops without triggering a popular anti-tax revolt.


There are many types of lottery games. Some involve selecting numbers or other digits in a sequence, while others are games of chance that offer a fixed prize. The latter are usually written with a m/M format, where m is the number of winning tickets and M is the total prize amount. For example, a game with the number 49 would have a winning chance of one in a million.

Lottery jackpots are a major driver of sales, not least because they give the games free publicity on news sites and in TV newscasts. However, these super-sized prizes have a dark underbelly: they lure people into gambling by dangling the promise of instant wealth in an era of inequality and limited social mobility. The popularity of these games has fueled concerns that they erode government integrity and foster corruption. They have also sparked controversy over how lottery money is used and whether they exploit the poor.


The prizes offered by lottery vary, and can include anything from a few bucks to a big cash prize. The amount of the prize is determined by a combination of factors, including how many tickets are sold and the number of winning numbers. Prizes can be awarded to individuals or groups, and may be paid in one lump sum or over decades of annuity payments. If a winner wishes to remain anonymous, they can hire an attorney to set up a blind trust. However, in some jurisdictions, public disclosure is required in order to claim a prize.

If you win the lottery, you should immediately seek the help of a financial planner and other professionals. They can help you make the best decisions about spending your money. They can also assist you with determining whether to take the lump sum or annuity option. They can also advise you on how to structure your tax withholdings.


The IRS taxes lottery winnings the same as any other income. Winnings are subject to a 24 percent federal tax withholding and may be subject to state taxes, depending on where the winners live. In some states, lottery winnings are taxable at a higher rate than other forms of income. Whether winners receive their prizes in a lump sum or annuity payments, it’s important to work with a tax professional to understand how much they will owe in taxes.

Regardless of how they win the lottery, winners should put together a team of professionals, including a tax attorney and financial planner. These experts will help them weigh their options and make the most of their windfall. They will also help them protect their privacy, as some winners end up losing their money because of poor spending habits and long-lost “friends” who try to take advantage of them. The team will also help them decide whether to take a lump sum payout or annuity payments.

By admin1989