Tax Implications of Playing the Lottery


Lotteries are a cultural phenomenon, operating on all continents except Antarctica. They have unprecedented popularity, and are legal in forty states. Most people view lotteries as harmless forms of entertainment, but they also object to their use as a tax-raising mechanism. In fact, opponents of lotteries often base their opposition on moral or religious reasons. These opponents may even abhor state-sponsored lotteries. However, the concept behind the lottery is nothing new.

According to the Council of State Governments, in fiscal year 2003, Americans wagered $44 billion on lotteries. This represents a 6.6% increase over fiscal year 2002. Lottery sales in the United States increased steadily between 1998 and 2003. As of January 2007, New York state had the most players per capita. The second-highest number of players was in Delaware, which is one of the few states without a lottery. However, Delaware’s lottery is the oldest, having been running since 1891.

Many states tax lottery wins. A winning ticket costs $1 and gets you a chance to choose a small set of numbers from a larger group. Drawings are held every week or two. New lottery games have recently been launched in Georgia and Michigan. Players can choose to play for only a penny or as much as 99 cents. Regardless of whether or not you win, lottery play can be a great way to spend your spare change. However, be aware of tax implications – most states tax lottery winnings as income.