The Taxes on Lottery Winnings

July 4, 2022 by No Comments


In the United States, there are 40 state lotteries. These are state-run monopolies, not subject to commercial competition. They use the profits to run various government programs. As of August 2004, these lotteries operated in forty states. According to the lottery’s website, in August 2004, almost 90% of the United States’ population lived in a state where the lottery was active. Anyone, of legal age, can buy a ticket.


The origins of the lottery can be traced back to the Middle Ages. In Rome and the Holy Roman Empire, the nobility began to hold lotteries as a way to raise money for public projects. As the lottery popularity grew throughout Europe, the concept began to serve other purposes other than just entertainment. Its word derives from the Dutch word “lot”, which means fate. Today, the lottery continues to be a popular way for governments and nonprofit organizations to raise funds.

Games offered

According to La Fleur’s 2004 World Lottery Almanac, almost every state offers cash lotto and instant games. Most states also offer numbers games, like pull tabs. Fewer states offer games such as video lottery games or keno, which are considered casino-type games and have lower acceptance among lottery players. In North Carolina, for example, players must be 18 years old to play. If you’re not sure if you’re old enough, you can find tutorials for playing online.

Odds of winning

While the odds of winning a lottery game vary depending on the state you live in, they are generally about one in one hundred million. For the California Super Lotto, the odds are about one in forty-two million. In comparison, the Mega Millions is 1 in 176 million. While the numbers are small, the chances of winning a lottery game are quite high, with an estimated payout of $313 billion per year.

Taxes on winnings

The taxman’s share of your lottery winnings can range from 40% to 60%, depending on your state and how you cash out your prize. The same holds true for prizes from community raffles, game show prizes and small prizes. Depending on how much money you win, you could end up paying more than $12.7 million in taxes. For a complete overview of taxes on lottery winnings, read our article on the subject.

Commissions on winnings

The commissions on winnings of lottery games vary by state. In New York, for example, the lottery commission is six percent, while in California, Illinois, and Texas, it’s five percent. In Pennsylvania, there’s no bonus commission for winning tickets. However, some states do offer some extras for winning tickets. In New Jersey, for example, retailers earn an extra two percent on jackpot-winning instant tickets.

Legality of lotteries

The legality of lotteries depends on whether the contest involves an element of skill, not chance. For example, predicting which college football game will win will not be considered a skill. If businesses were to conduct a contest that required the purchaser to purchase a product, this would not be considered a contest and would be an illegal lottery. Alternatively, if the contest includes an alternate entry method, this must be easy and free.