NO MATTER the excitement, there are also tax deductions when you win a lottery ticket.
Before you win the lottery, it’s important to know how much you might owe.
What are the tax deductions in a winning lottery ticket?
Winning the lottery is the dream of many people, but some people often overlook the taxes and paperwork involved.
When you win the lottery, the IRS takes 25% of your prize, per SmartAsset.
In addition to the 25%, your state and local taxes may take up to an additional 13% when filing your taxes in April.
The maximum federal tax is 37% and it is advisable to hire a financial adviser who can guide you through the tax process.
After the IRS takes 25%, the tax deductions basically depend on where you live and your annual income.
When you do your taxes, if you’re single and earning $90,000 a year, you owe 24% federal income tax.
If you win a 100,000 lottery, that bumps your salary up to 190,000 for the year.
Luckily, that doesn’t mean you pay 24% tax on 190,000, but rather on the additional income that exceeds your original tax bracket.
State and local taxes vary by state, and some even tax non-residents, so it’s best to check with your area.
How to buy a lottery ticket?
Buying a lottery ticket is quite simple.
If you want to buy in person, you can visit your local grocery store or convenience store.
You can then choose your own numbers or buy a set of randomly generated numbers.
Finally, you can buy the lottery ticket and wait for the draw.
You can also choose to buy lottery tickets online from reputable websites.
However, the lottery is illegal in some states, so check your local rules.
What is the biggest lottery ticket in history?
The biggest jackpot came in January 2016 when three winners from California, Florida and Tennessee took home $1.6 billion, as reported by the New York Post.
“I’m very proud that the ticket was sold here,” Chino Hills 7-Eleven clerk M Faroqui shared with the San Bernardino Sun.
“I’m very happy. It’s very exciting.”
The Chino Hills 7-Eleven received $1 million in bonuses for selling the jackpot ticket.