Do You Owe Pennsylvania State Taxes on Lotteries Won out of State?
If you are a Pennsylvania resident and an avid gambler or lottery player, understanding the tax implications of in- and out-of-state winnings is important. Know when you are required to pay taxes and you'll have more time to devote to enjoying your winnings.
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Lotteries Won Out of State
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All out-of-state gambling and lottery winnings, as well as in-state winnings which are not governed by the Pennsylvania State Lottery, are subject to state and local taxes according to the Pennsylvania tax code. The gains are taxed, meaning that the losses (tickets only) can be deducted from the winnings. As winnings from the Pennsylvania State Lottery are not taxable, losses incurred from buying state lottery tickets cannot be deducted.
Powerball Out of State
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While Powerball winnings from tickets purchased within the state are not taxable, winnings on out-of-state Powerball tickets are taxed in Pennsylvania. The winner should report them on his tax return.
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In-State Winnings
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Pennsylvania state residents who win prizes from the Pennsylvania State Lottery are not subject to state or local taxes on those winnings. They are taxable at the federal level, however.
Federal Taxes
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All lottery and gambling winnings are subject to federal taxes. Depending on your winnings, these taxes may be automatically withheld by the lottery. Winners of prizes over $600 will be given a special tax form to submit with their yearly tax returns, but even if you do not receive this form, the winnings must still be reported.
Losses and Recordkeeping
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It is important to keep good records in order to take advantage of your lottery and gambling losses. While you cannot subtract your losses from your winnings directly, you can claim gambling losses "up to the amount of your gambling winnings." Keep a record of the date and type of gambling you engaged in, as well as the location, your gambling partners, amount of money won or lost and any supporting documentation, such as tickets or credit card records substantiating your bets or lottery ticket purchases.
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References
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