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1 Joseph Henchman, et al., Lottery Tax Rates Vary Greatly by State 1 (2012)

handle is hein.taxfoundation/ffcjfxz0001 and id is 1 raw text is: FOUNDATION1
March 30, 2012
No. 295

Lottery Tax Rates Vary Greatly By State
By
Joseph Henchman, Alex Raut, and Kevin Duncan
With the Mega Millions jackpot reaching a record $540 million, Americans in 43 states and the District of Columbia are
lining up to buy tickets for Friday's drawing. Everyone knows that winners must choose between a lump sum payment and
installment payments, but where you purchase your winning ticket also matters, due to state income and withholding taxes.
As with wage income, some amount of lottery winnings is withheld for the government before you calculate your total tax bill
when filing your income tax the following year. While lottery winnings of $600 or less are not reported to the IRS, winnings
in excess of $5,000 are subject to a 25 percent federal withholding tax. In other words, if one person wins the jackpot and
chooses the $389 million lump sum payment, $97 million will go straight to the IRS. Next April, the jackpot winner or
winners can see if any of that amount gets refunded, or if they owe even more.
The same is true at the state level. While lottery winnings are subject to state income tax in most states, withholding tax varies
from zero (California, Delaware, Pennsylvania, and the states with no state income tax) to over 12 percent in New York City
(see Table 1). Arizona and Maryland have withholding rates for non-residents, so an out-of-state winner who bought a ticket
in those two states could face double withholding.

Table 1: Lottery Withholding Tax

State
................................................................................
................................................................................
................................................................................
................................................................................
...............................................
................................................
..........................................
..........................................
.....                .       ..  .    ..........................................
..........................................
.. ... .. ..........................................
.........................................
................................................................................
................................................................................
................................................................................
New Hampshire
................................................................................
................................................................................
................................................................................
...............................
................................                               .................

Withholding Tax Rate M%)
No income tax
10.8%
6A/

Arkansas
Cal..   ifo    ia. [[[[[[[[[[[[[[[[[[[[[[[[[[[
Colorado
Delaware
Georgia
. . . . . . . . ....... ... .......................................... .
................................................ ..................................................
H...............................
Idaho
Indiana
Kansas
. . . . . . . . . . .......................................................
Louisiana
Maryland
.Michigan             ..................
Mississippi
..............................................................................................
Montana
N    e  b r a sa..................................... ........................
.................................... .... ............................. .
L  ouiiii i  i a n a iiiiiiiiiiiiiiiiiiiiiiiiiii

...............................................................................................................................
.............................................................................................................................. ..
...............................................................               .   . .  . .  . .  . .  . . .
...............................................................................................................................
.............................................................................................................................. ..
4.0%
........................................................................................
...............................................................................................................................
.............................................................................................................................. ..
...............................................................................................................  . .........
...............................................................iiiiiiiiiiiiiiiiiiiiiiiiiiiii iiia i~      ii
...............................................................
.............................................................................................................................. ..
.............................................................................................................................. ..
.......................................................................................
.............................................................................iiiiiiiiiiiiiiiiiiiiiiiii .........~ i

North Carolina
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
...........
..............................
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
Ohio
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
.................................................................
..................................................................
...............................................
................................................
................................................
...............................................
..............................................
w       .... o   :       a     :**************************************************************
..................................................................................................
..................................................................................................
..................................................................................................
Oregon
..................................................................................................
..................................................................................................
..................................................................................................
................................................................................................................................
...................................
...........................
s M*.a::n:i::a:*.......................................................................,
.....  ..  ......................
Rhode Island
..................................................................................................
..................................................................................................
..................................................................................................
.................................
...........................
01A
...........................
............................
...........................
.. ............................
...........................
......  ............. 8  ...........................
..................................................................................................
..................................................................................................
..................................................................................................
South Dakota
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................
................................
............................................
.............................................
.............................................
..................................................................................................
..................................................................................................
..................................................................................................
Texas
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
:*i*ilj:*&  i: *******..........................................................................................................................................
.....................................................................
........................................................................
......................................                              .....
..................................................................................................
..................................................................................................
..................................................................................................
Vermont
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
..............................
............................................................
.....................................................
:...Jr               j
::.:i:i i C-
...................................................................
Washington
..................................................................................................
..................................................................................................
..................................................................................................
.....................................
...................................
..................................
...................................
...................................
r        in      j        ..................................
....      ..........      ...................................
.....  .  ........... a  ...................................
..................................   ....      ...................................................
................................
Wisconsin
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
..............................
.... .       Y    o                            ................................
. ................................
...................................................
..      .....  ..............     ....................................................
....................................................
District of Columbia
Source: USA Mega.

I.U%
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
..........................................................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................  ...........  ....
..............................................................................................................................  ..........
..............................................................................................................................  ...........  ..  ....  ..  .  .  ......
..............................................................................................................................  ..............  .......
...........................................................................................................................................  ..  ...        ......
..............................................................................................................................
5:54*--Y--:::O-:************
...............................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
6.0%
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
..............................................................................................................................
..............................................................................................................................
.................................................................................................................................
..............................................................................................................................                            ........
..............................................................................................                                                       H
...............................................................................................  ...............................                     .  I  .  ......
..................................                           .  .   ......
.................................................................................................................................                    .  .   ......
................................................................................................................................                        ..  ......
.................................................................................................................................       4     0      .  ...  ......
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
8.0%
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
..............................................................................................................................               ......................
....................................................................................................................................
........................................................................................................................
..............................................................................................................................                        .      .....
..............................................................................................................................
.................  ......
.............. e  .........
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
7.0%
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
.........................................................................................................              ..................   ...
...............................................................................................
...............................                     .               .....
................................................................................................................................................  ...       ......
.............................................................................................................................. *** ...............  ...  .  ......
................................................................................................................................................  ...       ......
................................................................................................................................................  ...  .    ......
................................................................................................................................................  ...       ......
...............................................................................................  .............................................  ...  .      ......
................................................................................................................................................  ...       ......
.......................................................................................................................................
................................  .......                  ...............................                                    ......
..........................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
No income tax
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
...............................................................................................
..........................................................................................                                              .  .......  .....  ..........
...............................................................................................
..............................................................................................                                         ..: .......  ................
...............................................................................................
..............................................................................................  .......                                                 X   : ......
...........
In                            ...            ......
...............................................................................................  ...           ...
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
No income tax
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
..............................................................................................
..........................................................................................                                                .      ..................
................................................................................    .....
................................................................................
..............................................................................................................................
................
..............................................................              .............................................
.............   ........
..................................................... ..
............................................................................................................................................  .  ....  ......  ......
.............................................................................................................................................  .  ...  .....  .....
6.0%
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
..............................................................................................................................................................  ......
..............................................................................................................................................              ......
............................................................................................................................................
............................................................................................................................ .
.........................................................................................................................
.....                                     ......
.......................................                     ...............................
........................................................................................................................................................    ......
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
No income tax
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...............................................................................................................................................................  ......
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F 0
iscal Fact

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