In the United States of America, lotteries are governed by 47 jurisdictions and 44 states including the District of Columbia, Puerto Rico, and the US Virgin Islands. Most of these states already run their own state lottery games, but the Powerball and Mega Millions lotteries are the largest and most popular lotteries that draw huge interest.
The Mega Millions and Powerball jackpot have the ability to reach staggering jackpot amounts up to the value of billions of dollars. These huge lottery games give the state a substantial contribution towards funding healthcare, education, and even infrastructure. Lottery players love these two massive American lotteries because they roll over quickly and always have a knack of generating $100 million-plus jackpots.
Jackpots in the US are usually very big, so when paid out in lump sums to the winner, are taxed. The jackpots can also be made out into annuity payments. If you choose the annuity option, which is the extended pay-out, the state will take the present cash value of the jackpot and helps you buy bonds to generate interest to fund future payments made at fixed intervals of time. By doing this it provides you with a steady stream of income for many years going forward from between 20 to 30 years.
For example, if you won a $14 million jackpot in the Powerball lottery game, you could earn up to $538,461 a year for the next 26 years. Should you choose to take the lump sum option, you will receive the $14 million, but after 58% tax, you will be left with $8,120,000. The state guaranteed that if the jackpot winner chooses the annuity option, their heirs will get all the remaining instalment should they pass on.
Gambling Losses are Tax Deductible
If you decide to spend a substantial amount of money playing the lottery in a year, your old tickets can be quite useful to you. Gambling losses are tax deductible, but only to the extent of how much you have won. This means you need to report all the money you have won as taxable income on your return. The deduction for your losses is only applicable if you are eligible to itemize your deductions. If you claim the standard deduction, you can’t reduce your tax by gambling losses.
The IRS says you cannot offset losses against winnings and report the difference. If you spend, $1,600 a year on lottery tickets and you only win $600, you need to report the $600 win even though your losses amounted to $1,000. According to tax rules, if you have gambling losses, you can claim them as an itemized deduction, but you can’t deduct more than the winnings you reported.
The documentation you will need to prove your losses can include Form W-2G, Form 5754, wagering tickets, cancelled checks, or credit records and receipts from the gambling facility. Interestingly, this law helps winners more than losers, so think positively. Think like a winner, and save an account of all those old tickets!
Be the Smart Player on PlayUSALotteries.com
Be smart with your play and learn more about lottery games. Get lots of detailed information about new games (instant and online), prizes on instant games, and special winning numbers. By knowing all this, you gain an advantage over the game by knowing which lottery games to play that have better odds.
For example, the odds of winning Lotto 6aus49 is 1 in 13,983,816, which is ten times more likely to give you a prize than Mega Millions would. Some state lottery games even offer second chances for every lottery draw. Do your best to find out about the second chance lottery draws and take your second chance with them by registering any qualifying scratcher codes and entries from games you have previously entered.
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