Taxes on Lotto Winnings
If your prize is more than $600, the Internal Revenue Service requires the organization running the lottery to withhold 25 percent of your winnings from your payout. If you win a large prize and you elect to receive a lump sum payment, taxes will be withheld from the payout. If you elect to receive payments over a period of years, taxes will be withheld from each annual payment. You’ll receive a Form W2-G, which will show your total winnings and the amount of tax withheld. If you win less than $600 you’ll receive all your winnings at that time, but you still must pay taxes on the winning at the end of the year. Since lotto winnings are figured as part of your gross income, the amount of taxes you end up owing on your winnings may be less than 25 percent of the total, if you fall into a lower tax bracket. When figuring your tax bill, the IRS looks at your total adjusted gross income, not merely your lotto winnings.