Taxes on Winning the Lotto


Lotteries were originally used by the Continental Congress to fund their Colonial Army and raise money for various public projects. Alexander Hamilton, who was the first President of the United States, argued that it was the simple concept of lotteries that attracted people to participate. He noted that people were willing to risk small sums of money for a good chance of gaining a great deal. While taxation was a new concept to the United States, lotteries had proven to be a successful method for public funding.

Lotteries are a game of chance

Though it is true that winning the lottery is a matter of luck and chance, you can increase your odds of winning by playing more state competitions or buying scratch-off tickets. Smaller games with smaller prizes are better than larger ones because they are more likely to result in a winning ticket. You can also try playing second-chance games for numbers that you did not choose in the first time. If you happen to win one of these games, you can use the winnings to buy more tickets.

They offer annuities

Although many lottery winners mismanage their jackpots, this doesn’t mean that you should do the same. In fact, many people who win the lotto should opt for an annuity rather than a lump sum. Choosing an annuity is generally a safer move, as you are not as likely to spend it too quickly or risk being taken advantage of. Moreover, if you have a healthy risk appetite, the lump sum payment might turn out to be more expensive than the annuity.

They are tax-free

Although the federal government views winning the lottery as “tax-free,” this is not necessarily true. As a rule, your winnings are taxable to the extent that you win more than $500,000. In addition, if you win $5,000 or more, the IRS requires that you pay income taxes on the amount you received. The amount you owe depends on your tax bracket and the amount of winnings you received. If you don’t pay taxes on your winnings, you may have to pay an additional penalty.

They are similar to bingo

Lotto and bingo are both forms of gambling. While they have similar elements, there is a distinct difference between them. Many state courts have ruled that they are each a form of lottery. Congress can make a distinction between these games, however, because they appear only once in the same section of the United States Code, Title 18.