Taxes on Winning the Lottery
Americans spend over $80 Billion a year on lottery tickets, and while it’s tempting to dream about winning a jackpot, it’s important to keep in mind that you could end up paying half of your prize money as taxes. Instead, use your winnings to build an emergency fund or pay off your credit card debt.
The casting of lots to determine fate has a long history, with evidence dating back to the 2nd millennium BC. In the 15th century, public lotteries began in the Low Countries to raise funds for town fortifications and help the poor. These were popular, and hailed as a painless form of taxation.
A modern financial lottery is a process by which a group of people pays a fee to be awarded prizes based on a random draw of numbers, or numbers generated by a computer. There are many different types of lottery games, and the prize amount can range from cash to a unit in a subsidized housing project, or kindergarten placement at a prestigious school.
The popularity of lotteries has spread across the United States. When one state legalizes a lottery, it’s common for nearby states to follow suit, says Matheson. A national lottery like Powerball or Mega Millions is a more recent development.