Winning a lottery opens the doors of fulfilling your long cherished dreams overnight. It is because the bonanza prizes often reach cosmic magnitudes. Nevertheless, the moment you get your hands on the prize bond, the government tax collectors always arrive to claim their portion in the prize money. Therefore as far as the concept of lottery winning taxes are concerned in United States, it is true that the some of the lotteries are taxed.
Lottery winning taxes are levied in United States
Lotteries such as US Powerball and Mega Millions are subject to taxations and the publicized prize money is actually the amount that is before tax deductions. However, some of the lotteries in United States are not taxed that is the amount that is advertised is same before and after getting received by the individual. So, whenever you come across or receive such a huge amount of money through lottery winning, always consult a tax professional who will tell you whether it is taxed or not. Most of the time, such huge amounts are subject to taxation at a local level.
Are lottery winning taxes imposed on countries apart from the United States?
Lotteries in countries such as Australia, Canada, Spain, Germany, South Africa, France, Hungary, Ireland, Japan, Italy, New Zealand and Ontario are tax free. This means that the sum of winning money that a person wins is same as it was advertised. Moreover, apart from Spain, the citizens of most of these countries are exempted from double taxation policy by having a permit to get a full tax reimbursement.
Sometimes what happens is that the amount of money winning lottery have already been deducted at source. Therefore, it is always preferable that you consult the tax requirements of a certain lottery if you come across any questions regarding it.
Various types of lottery winning taxes encountered by the lottery players
Keep in mind that just like all other forms of taxes, the lottery winning taxes are levied by the federal or local government. It is because, the ticket for the lottery is materially and tangibly purchased from them. Once this point is clear, let us know take a wide-ranging glance at various types of lottery winning taxes the citizens of the United States come across:
The lottery organization is in authority of deducting the taxes from the original amount of money that is advertised. In other words, before the lottery winning sum is presented to the winner, it is deducted. So let suppose that if a lottery player wins $5 million worth prize bond in Mega Million lottery game, then the federal government of the United States will deduct some percentage of money as tax from the winning amount before it is presented to the winner. In this result the prize advertised and the prize received will not be same as the receiver will get the money that is subject to prize-post tax.
It is incumbent that the individual players should take full responsibilities of the taxes that the federal government subject them with in their residential home country. Therefore before deciding whether you should win such a huge sum of money as jackpots in lotteries, seek consultation with an accountant or financial advisor for a safe side.
These taxations come under the category where the taxes are not subtracted at the source. Moreover, these taxes take in to account the income tax, other forms of taxes and their nature fluctuate as they are based on player’s home country taxation. The individual player needs to bear the responsibility of local fiscal policy. Therefore it is always recommended that whenever the players win huge sums of money, they should always take advice from an accountant who can address the matters of local taxes policy.
As a result, the lottery winning taxes is a complicated concept in United States as opposed to the other nations. It is because, the US is composed of multiple states and in each states the lottery winning taxes differ significantly from another. In each individual state, the tax laws govern the disbursement of lottery prizes
