Oklahoma State Tax Rate On Gambling Winnings
Despite being home to Las Vegas, Reno, and Atlantic City, the United States hasn’t had the best reputation with gambling, and it is much more restricted here than it is across most of Europe and Asia. But where it does exist, it flourishes, and state lotteries are proof of that.
- Oklahoma State Taxes On Lottery Winnings
- Oklahoma State Tax Rate On Gambling Winnings Today
- Oklahoma State Tax Rate On Gambling Winnings Losses
- Oklahoma State Tax Rate On Gambling Winnings Money
Every year, these lotteries generate over $70 billion in ticket sales, and the US is also home to the world’s biggest lottery jackpots, with Mega Millions and Powerball eclipsing anything offered in Europe, Canada, Australia, and Asia.
- States that allow gambling or operate an official state lottery use the proceeds either for the general fund or for specific purposes. Like a lot of states, Oklahoma restricts casino-style gambling operations to Native American reservations, and also allows betting on horse racing and certain types of games for the benefit of charity or nonprofit groups (such as church bingo fundraisers).
- The state does not withhold percentages of gambling winnings for state purposes. However, federal law may require tribal casinos to issue a W-2G form to persons and may withhold winnings if certain conditions are met.
But there is one downside to all of this, because while Americans do have it better than many Europeans when it comes to lotteries, we’re a little behind the times when it comes to taxing lottery wins.
In reality, if you earned. For example, earnings from a rental property, or winnings from gambling, are countable as taxable income. Selling property in Oklahoma is also taxable even if you are not a. Jul 30, 2019 In addition to federal taxes payable to the IRS, many state governments tax gambling income as well.
In the UK, every penny you win on the slots, sports betting, lottery or any other form of gambling is tax-free. Here in the US, if you win a jackpot, a substantial sum could be taken away from you and even if you walk away with a raffle prize, like a car, you’ll be expected to pay tax.
The question is, how do these taxes differ from state to state. How does federal tax and income tax impact your lottery winnings; how does your state income tax and income tax bracket change the amount of money you need to give the government when you win big?
Lottery Jackpot Taxes
Every state has its own law governing state income taxes and these laws concern the player’s residence as opposed to the location of the lottery. For instance, if you live in New York City but have bought a lottery ticket for the Florida Lottery, you’ll pay taxes based on the New York rate and not the Florida rate.
Here is a quick run-down of all state lottery tax rates in the United States:
- Alabama – no state lottery
- Alaska – no state lottery
- Arizona – 5 %
- Arkansas – 7 %
- Colorado – 4 %
- California – no state tax rate on lottery winnings
- Connecticut – 6.99 %
- Delaware – no state tax rate on lottery winnings
- Florida – no state tax rate on lottery winnings
- Georgia – 6 %
- Hawaii – no state tax rate on lottery winnings
- Idaho – 7.4 %
- Illinois – 4.95 %
- Indiana – 3.40 %
- Iowa – 5 %
- Kansas – 5 %
- Kentucky – 6 %
- Louisiana – 5 %
- Maine – 5 %
- Maryland – 8.75 %
- Massachusetts – 5 %
- Michigan – 7.25 %
- Mississippi – no state lottery
- Missouri – 4 %
- Montana- 6.9 %
- Nebraska – 5 %
- Nevada – no state lottery
- New Hampshire – no state tax rate on lottery winnings
- New Jersey – 8 %
- New Mexico – 6 %
- New York – 8.82 %
- North Carolina – 5.499 %
- North Dakota – 2.9 %
- Oklahoma – 4 %
- Ohio – 4 %
- Oregon – 8 %
- Pennsylvania – 3.07 %
- Rhode Island – 5.99 %
- South Carolina – 7 %
- South Dakota – no state tax rate on lottery winnings
- Tennessee – no state tax rate on lottery winnings
- Texas – no state tax rate on lottery winnings
- Utah – no state lottery
- Vermont – 6 %
- Virginia – 4 %
- Washington – no state tax rate on lottery winnings
- West Virginia – 6.5 %
- Wisconsin – 7.65 %
- Wyoming – no state tax rate on lottery winnings
What Happens if You Win Big?
As with all income taxes, the state tax isn’t the only rate that you pay. You’ll also have the burden of federal taxes, as well as taxes levied on specific lotteries. For instance, a law known as the Tax Cut and Jobs Act was signed in 2017 and charged a flat rate of 37% on all Powerball jackpots. That’s a staggering sum of money and it makes the jackpot somewhat less appealing.
If you are lucky enough to scoop a big win on any major lottery, you should first consult with an expert. They can advise on the best course of action, offering guidance that can help you to secure a tax break.
Prize Money: Annuity Payment or Lump Sum?
Mega Millions and Powerball jackpots can be released as an annuity or a lump sum. An annuity pays a larger sum of money in 30 annual installments, while a lump sum pays a smaller amount in one go. The vast majority of winners choose the latter, as they want the money now, but an annuity is often the better option.
The difference can be quite staggering. For instance, the largest amount ever won by a single ticket holder was a jackpot of $1.5 billion claimed on Mega Millions. The winner, a player from South Carolina, chose the cash value and walked away with a sum of $877 million before tax. That’s still a lot of money, but it’s a lot less than $1.5 billion.
The issue is that many players assume the payments will just stop when they die, which means they’ll lose everything. But the payments will actually continue and will simply go to your estate. Not only will you get a larger sum, but by avoiding such a sudden windfall, you can spread the taxes and responsibility out a little more and receive your cash in safe, staggered payments.
Although it can feel like that money will last forever, the history of major lotteries is littered with stories of players who won vast sums of money and then blew it all in just a few years. They buy houses and cars, they give money to friends, throw it at businesses, and generally live like there is no tomorrow.
But that tomorrow eventually rolls around, their money disappears, and they have nothing to show for their success but a house they can’t afford, a tax bill they can’t manage, and an empty feeling inside.
By staggering the payments, you can avoid such a disaster and guarantee a much larger income over the next few decades. If you’re not sure which option is right for you, speak with a tax professional and they will advise accordingly.
What About Global Lotteries?
There are a few misconceptions about global lotteries. Firstly, many players assume that you need to be a resident of that country in order to play its national lottery. This simply isn’t true. After all, lottery organizers want to sell as many tickets as they possibly can and preventing entire countries from purchasing tickets wouldn’t help them achieve that goal.
In fact, one of the reasons Mega Millions and Powerball have experienced a surge in recent years is because many foreign players are buying tickets. They hear about the astronomical Powerball jackpot sums, they want a piece of the action, and so they use online sites to buy their tickets. These sites essentially work as intermediaries, giving players access to lotteries that would otherwise not be available to them.
And therein lies the real issue here. Because, while you can technically buy national lottery tickets from all over the world, that only applies if you can get your hands on them and because there are no officially licensed vendors operating outside of the official regions, this isn’t always easy.
Many visitors to the United States have purchased Mega Millions and Powerball lottery tickets, only to win when they returned home and then have to fly back to the US to collect their prizes! You can do the same thing if you ever visit Europe, just make sure the lottery is drawn when you’re still there!
As for the tax issue, you can’t escape tax just because you bought your ticket in a tax-free country. For instance, if you live in the United States but buy a ticket to the UK Lotto or the European EuroMillions, you’ll need to pay tax on your winnings based on the federal and state tax rate. You’ll have to declare this money as gambling profit and can’t avoid the taxman simply because you won money in a tax-free country.
But don’t worry, because that doesn’t mean that foreigners have it better when it comes to US lotteries. They will be charged a flat rate of 30% on all US lottery prizes and may also face charges in their own countries.
No doubt about it, winning the lottery dramatically changes a person’s life. A financial windfall of that magnitude quickly grants you a level of financial freedom you probably have trouble imagining.
But becoming a Mega Millions or Powerball jackpot winner doesn’t change everything. If you are the lucky winner, you still have to worry about bills and taxes. This is when a lottery tax calculator comes handy.
How are lottery winnings taxed under federal and state?
Lottery winnings are considered ordinary taxable income for both federal and state tax purposes. That means your winnings are taxed the same as your wages or salary. And you must report the entire amount you receive each year on your tax return.
For example, let’s say you elected to receive your lottery winnings in the form of annuity payments and received $50,000 in 2019. You must report that money as income on your 2019 tax return. The same is true, however, if you take a lump-sum payout in 2019. You must report that entire amount as well. For this, a tax calculator is an essential tool.
Note: Before you receive one dollar, the IRS automatically takes 25 percent of your winnings as tax money. You’re expected to pay the rest of your tax bill on that prize money when you file your return.
What is the tax rate for lottery winnings?
When it comes to federal taxes, lottery winnings are taxed according to the federal tax brackets. Therefore, you won’t pay the same tax rate on the entire amount. The tax brackets are progressive, which means portions of your winnings are taxed at different rates. Depending on the number of your winnings, your federal tax rate could be as high as 37 percent as per the lottery tax calculation.
State and local tax rates vary by location. Some states don’t impose an income tax while others withhold over 15 percent. Also, some states have withholding rates for non-residents, meaning even if you don’t live there, you still have to pay taxes to that state.
Do I have to pay state taxes on lottery winnings if I don’t live in the state where I bought the ticket?
Oklahoma State Taxes On Lottery Winnings
Most states don’t withhold taxes when the winner doesn’t reside there. In fact, of the 43 states that participate in multistate lotteries, only two withhold taxes from nonresidents. Arizona and Maryland both tax the winnings of people who live out-of-state.
Can I change the amount of tax the lottery withholds?
You don’t have a choice on how much state or federal tax is withheld from your winnings. The only piece you can control is how much money you save to cover any extra money you may owe. For this, you can use a federal tax calculator.
Do lottery winnings count as earned income for Social Security purposes?
Lottery winnings are not considered earned income, no matter how much work it was purchasing your tickets. Therefore, they do not affect your Social Security benefits.
Does winning the lottery affect my tax bracket?
Winning the lottery can affect your tax bracket in a big way. An average family’s top federal tax rate could go from 22 percent to 37 percent. But remember, if that happens, you likely won’t pay the top rate on all of your money.
That is unless your regular household income already places you in the top tax bracket prior to winning. In that case, all of it is taxed at 37 percent. This can be calculated using a tax calculator. Lottery winnings are combined with the rest of your taxable income for the year, meaning that money is not taxed separately.
What are the benefits of taking a lump sum payment versus annuity payments?
Oklahoma State Tax Rate On Gambling Winnings Today
If you take a lump sum, you have more control over your money right now. You can choose to invest it into a retirement account or other stock option to generate a return. You could also use it to buy or expand a business.
Several financial advisors recommend taking the lump sum because you typically receive a better return on investing lottery winnings in higher-return assets, like stocks. If you elect annuity payments, however, you can take advantage of your tax deductions each year with the help of lottery tax calculator and a lower tax bracket to reduce your tax bill.
Oklahoma State Tax Rate On Gambling Winnings Losses
The decision for which option is better is complex. It all depends on the size of the lottery winnings, your current and projected income tax rates, where you reside, and the potential rate of return on any investments. If you win big, it’s in your best interest to work with a financial advisor to determine what’s right for you. However, you can also determine the taxes using a federal tax calculator.