A MYSTERY Ohio lottery player has won $50,000 prize, but their excitement maybe short-lived.
The winner will lose more than $14,000 right off the bat due to tax withholdings.
Google MapsThe ticket was sold at the Giant Eagle store in Medina, Ohio[/caption] GettyWhile $36,000 is still a life changing sum for many, the reduction highlights the financial reality that comes with lottery winnings-players rarely receive the full amount advertised[/caption] GettyAs of February 14, the Ohio Lottery still has two remaining top prizes of $40,00 per year for 25 years[/caption]The anonymous winner in Medina scratched off the “Hit it Big” ticket at a local retailer, securing a win that many would dream of.
However, before they can cash out, a significant chunk will be deducted for federal and state taxes.
The ticket was sold at the Giant Eagle store in Medina, Ohio, OH Lottery said in a statement.
The “Hit it Big” game is a popular $10 Ohio lottery scratch-off ticket.
While it offers a top prize of $50,000, players who win this amount will find themselves losing a portion to mandatory tax deductions.
While $36,000 is still a life changing sum for many, the reduction highlights the financial reality that comes with lottery winnings-players rarely receive the full amount advertised.
The winner will still have to deal with any additional local taxes they owe.
This can further reduce the total amount they take home, depending on their specific location in Ohio.
As of February 14, the Ohio Lottery still has two remaining top prizes of $40,00 per year for 25 years.
Winners of these remaining top prizes will receive $40,000 annually for the next 25 years.
But even with that much money over time, tax deductions will reduce their payouts each year.
In addition to the top prizes, the game offers smaller payouts, ranging from $10 to $10,000, which are also subject to tax withholdings.
The Ohio Lottery, which has contributed to more than $33 billion to education since its inception in 1974, continues to offer a variety of scratch-off games and other lottery option.
TAXES ON WINNINGS EXPLAINED
When you win a lottery, your winnings are treated like regular income and taxed just like your paycheck.
Lottery winnings: lump sum or annuity?
Players who win big on lottery tickets typically have a choice to make: lump sum or annuity?
The two payout methods can impact how much money you get from your prize.
Annuities pay out slowly in increments, often over 30 years.
Lump sums pay all at once but in a smaller amount, as taxes are withheld in one go. That means 24% of your prize goes to Uncle Sam right away. Many states tax winnings as well.
Annuities can provide winners time to set up the financial infrastructure required to take in a life-changing amount of money, but lump sums have the benefit of being taxed only once.
Inflation is also worth considering when making a choice, as payouts do not adjust with the value of a dollar. That means that you’ll likely be getting less valuable money towards the end of an annuity.
Each state and game pays out prizes differently, so it’s best to check with your state’s lottery to confirm payment policies. A financial advisor can also help you weigh the pros and cons of each option.
Experts have varying opinions on whether to take the lump sum or take the annuity.
How much you owe depends on your total income and where it falls in the tax brackets, which range from 10% to 37%.
If you win more than $5,000, the IRS takes 28% off the top for federal taxes, TaxSlayer explained.
On top of that, your state might also take a cut.
You’ll get a Form W-2G, which shows your winnings and how much has already been withheld.
Lottery taxes can vary depending on where you live, each state has its own tax rates.
If your winning tops $5,000, the state could withhold up to 15% for taxes.
Some state like Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming-don’t have a state income tax, so you may not owe anything on your lottery prize.
However, keep in mind the state where you bought your ticket.
If you live somewhere else, you might owe taxes as a non-resident, but you’ll still be subjected to withholding if you’ve won more than $5,000.
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