Taxes
Unfortunately, lottery scams have become widespread as fraudsters around the world have latched on to the genre as a good way to con money out of people. By trying to convince their victims that they have won a prize, they can actually steal from them instead.
Each country has its own tax laws, and in the U.S. it also varies by state, but regardless of where you play it is always a good idea to consult a financial adviser or tax expert.
Your individual circumstances are a major factor in how much you might owe. If you take an annuity rather than a lump sum, it could also complicate the situation. An adviser would therefore be able to provide you with personalised, accurate information.
Here are the different rules in each of the locations where you can play ‘millionaire for life’ annuity-style lotteries.
Cash4Life
In the U.S., federal taxes apply no matter where you buy your lottery tickets. There are no deductions on prizes up to $600, but winnings between $600 and $5,000 must be reported on income tax forms. If you win more, there is a sliding scale from 24 percent to 37 percent.
The following table has all the state withholdings for the jurisdictions that play Cash4Life.
| State | State Tax Rate |
|---|---|
| Florida | No state tax on lottery prizes |
| Georgia | 5.75% on prizes above $5,000 |
| Indiana | 3.23% on prizes above $1,200 |
| Maryland | 8.95% on prizes above $5,000 |
| Missouri | 4% on prizes above $600 |
| New Jersey | 5-8%, starting on prizes above $10,000 |
| New York | 10.9% on prizes above $5,000 |
| Pennsylvania | 3.07% on prizes above $5,000 |
| Tennessee | No state tax on lottery prizes |
| Virginia | 4% on prizes above $5,000 |
Lucky for Life
As well as the federal withholding, you have to pay state tax in most of the jurisdictions that play Lucky for Life. If you live in a different state to where you bought your ticket, you still have to pay the required tax, but you should also speak to a financial professional. The table below shows all the relevant rates for the states where Lucky for Life is based.
| State | State Tax Rate |
|---|---|
| Arkansas | 4.9% |
| Colorado | 4% on prizes above $5,000 |
| Connecticut | 6.99% on prizes above $5,000 |
| Delaware | 6.6% |
| District of Columbia | 8.5% on prizes above $5,000 |
| Idaho | 6.5% on prizes above $5,000 |
| Iowa | 5% on prizes above $5,000 |
| Kansas | 5% on prizes above $5,000 |
| Kentucky | 5% |
| Maine | 7.15% on prizes above $5,000 |
| Massachusetts | 5% on prizes above $5,000 |
| Michigan | 4.25% on prizes above $5,000 |
| Montana | 6.9% on prizes above $5,000 |
| Nebraska | 5% on prizes above $5,000 |
| New Hampshire | No state tax on lottery prizes |
| North Carolina | 5.25% |
| North Dakota | 2.9% on prizes above $5,000 |
| Ohio | 4% on prizes above $5,000 |
| Oklahoma | 4% on prizes above $5,000 |
| Rhode Island | 5.99% on prizes above $5,000 |
| South Dakota | No state tax on lottery prizes |
| Vermont | 6% on prizes above $5,000 |
| Wyoming | No state tax on lottery prizes |
UK Set For Life
There is no tax on lottery prizes in the UK, so if you win a prize on Set For Life, you are guaranteed to receive the full amount, even if it’s the jackpot of £10,000 a month for 30 years. However, you should be aware of various tax implications that may result from a big lottery win, such as the seven-year rule that applies to inheritance tax (IHT). This is designed to stop people from giving their money away just before they die to avoid IHT.
Remember that Set For Life jackpots are paid out to the winner’s estate if they die before 30 years have passed. Speak to a tax expert about your financial situation if you win one of the top prizes.
Set For Life Australia
Lottery prizes in Australia are awarded tax-free. If you win the Division 1 prize of AU$20,000 a month for 20 years, that is exactly how much you will receive. Keep in mind that you may also have to pay tax on the interest that accrues in your account as time goes on and your wealth increases, although this is a subject to discuss with a local financial adviser.
EuroDreams
Most of the countries that play EuroDreams do not impose tax on lottery winners. However, there are a few nations where a portion of the top prizes is withheld. You’ll have to consult a tax expert about how the EuroDreams annuity of €20,000 a month for 30 years would be impacted in these locations. The specific tax rates are displayed in the table below:
| Country | Tax Rate |
|---|---|
| Austria | No tax on lottery prizes |
| Belgium | No tax on lottery prizes |
| France | No tax on lottery prizes |
| Ireland | No tax on lottery prizes |
| Luxembourg | No tax on lottery prizes |
| Portugal | 20% on prizes above €5,000 |
| Spain | 20% on prizes above €40,000 |
| Switzerland | 35% on prizes above CHF 1 million |
Daily Grand
In Canada, lottery prizes are not taxable. However, if you take one of the annuity options in Daily Grand, worth CA$1,000 a day for life or CA$25,000 a year for life, this may have tax implications. There are also lump-sum options for the top two prizes. A tax professional is best equipped to advise you on how to look after your finances in the event of a big win.