Lucky Powerball winner only owes federal taxes
Sunday, July 31, 2016
The winning Powerball ticket last night, July 30, was sold in New Hampshire. If the person who bought it is indeed a resident of the Granite State and not just a visitor passing through, he or she also is very tax lucky.
A single New Hampshire lottery ticket had the winning numbers of 11, 17, 21, 23, and 32, with the Powerball of 5.
New Hampshire only taxes dividend and interest income, so the state won't get any immediate cut of the winner's jackpot of $330.6 million as a lump sum or, if the winner chooses 30 annual annuity payments, $478 million extended payout.
And the winner's luck doesn't stop there.
No tax on gambling winnings: Back in 2009, New Hampshire instituted a 10 percent tax on all gambling winnings of more than $600.
But after lottery officials reported dramatic drops in ticket sales, especially for scratch off games sold by stores along state borders, lawmakers reconsidered the levy.
In 2011, the gambling tax was repealed.
Big federal tax bill, though: So all the tax that the new New Hampshire multimillionaire has to worry about right now is what is owed Uncle Sam.
New Hampshire officials spell out the tax process for winners on the NHLottery website:
The Lottery Commission is required to report any winnings over $599 to the Internal Revenue Service using a W2-G document; this will be sent to you at the end of the year.
There is a federal tax withholding of 25% for any winnings over $5,000. The top federal graduated tax rate is 35% 39.6% [NHLottery needs to update its tax rate data].
Lottery winners may be at a tax rate other than the 25% withholding rate.
Non-residents of the United States will have a 30% tax withholding for any winnings over $599.
Future N.H. tax bills: Of course, New Hampshire is hoping that the winner will invest at least some of the money in instruments that pay dividends or interest.
That way the state will collect at least some revenue from its 5 percent tax on that unearned income.
To help keep all tax bills as low as possible, the winner should talk with a tax professional before claiming his or her lottery winnings. That's one of the 5 tax tips for lottery winners that I posted back in January when the Powerball reached a record $1.6 billion.
Smaller, but taxable winnings, too: Even if you didn't win the big jackpot or any of the other smaller, but still quite nice payouts --a $2 million winner in Pennsylvania and $1 million winning tickets in California, Florida, Georgia, Nebraska, New Hampshire (really? enough!), Pennsylvania (again, spread it out people!), South Carolina, Tennessee, Washington and West Virginia -- in last night's drawing, you might want to check out the tax tips anyway.
As the lottery officials in my former home of Maryland used to say, next time it could be you!
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