Lotto Tax
The question of lotto tax is an important consideration for anyone dreaming of a big jackpot. There are several different factors to explore, including where you are playing, whether you played online, tax on interest, and tax if you gift money to friends or family.
Paying Tax on Lottery Winnings - Global Rates
Europe
Most European countries, including the UK, Ireland and France, do not tax lottery winners. However, there are some nations where winners are charged tax. Get details on their specific tax rates in the table below:
| Country | Tax Rate |
|---|---|
| Spain | Prizes of more than €40,000 are taxed at 20% |
| Switzerland | Swiss players face a 35% levy on anything greater than CHF1,000 |
| Portugal | Prizes worth more than €5,000 are taxed at 20% |
| Netherlands | There is a tax rate of 29% for prizes above €449 |
| Poland | Players are taxed at 10% on prizes worth more than 2280 zl |
| Slovenia | There is a 15% levy on Slovenian prizes over €300 |
| Italy | Players are taxed at 20% when rewards are worth more than €500 |
| Croatia | Players are taxed on any prizes above HRK750, starting at a rate of 10% and increasing up to a maximum of 30% as prizes grow |
North America
Lottery prizes won in Canada are paid tax-free. In the US, there is an initial federal tax obligation of 25% if the value of any prize exceeds $5,000, with more due, depending on the player’s yearly earnings, when they file their tax return. Players may then face further taxes, depending on the state where they bought their ticket.
While some states - California, Florida, New Hampshire, Puerto Rico, South Dakota, Tennessee, Texas, U.S Virgin Islands, Washington State and Wyoming – do not charge state tax on lottery winnings, there is a state withholding everywhere else.
| Tax Rate | State |
|---|---|
| 2.9% | North Dakota |
| 3.07% | Pennsylvania |
| 3.23% | Indiana |
| 4% | Colorado, Missouri, Ohio, Oklahoma, Virginia |
| 4.25% | Michigan, Louisiana |
| 4.8% | Arizona |
| 4.9% | Arkansas |
| 4.95% | Illinois |
| 5% | Iowa, Kansas, Kentucky, Massachusetts, Mississippi, New Jersey, Nebraska |
| 5.25% | North Carolina |
| 5.75% | North Carolina, Georgia |
| 5.99% | Rhode Island |
| 6% | New Mexico, Vermont |
| 6.5% | West Virginia, Idaho, South Carolina |
| 6.6% | Delaware |
| 6.9% | Montana |
| 6.99% | Connecticut |
| 7.15% | Maine |
| 7.25% | Minnesota |
| 7.65% | Wisconsin |
| 8% | Oregon |
| 8.5% | Washington D.C |
| 8.95% | Maryland |
| 10.9% | New York |
South Africa
South African lottery prizes are not taxable, so anyone who wins a big jackpot on a game such as South Africa Lotto, South Africa Powerball or South Africa Pick 3 will not face deductions on their initial lump sum.
Australasia
Lottery prizes in Australia are awarded as tax-free lump sums. It is the same in New Zealand, where players are not taxed on lottery wins.
South America
Brazilian players of Mega Sena will be subject to an income tax of 13.8% on any prize they win.
Paying Tax on International Lottery Prizes
If you play an international lottery online, you may be liable to pay taxes. If you use a concierge (or messenger) service, where official tickets are bought on your behalf, you will be taxed at the rate where the ticket was purchased. If you won a lottery in a country that taxes lottery winnings and live in a country which also withholds a percentage of gambling wins, you will usually only have to pay tax once, providing the two nations have a Double Taxation Agreement. You should check with a financial expert as to whether this is the case for you.
If you use a betting service, where you are wagering on the results of a draw rather than buying a ticket, the rules for your country of residence apply.
Tax on Interest
Even if you reside in a country which does not tax lottery winnings, or have played a game based in such a country, you need to be aware of your tax obligations. It is likely that you will be taxed on the interest that builds up on the lump sum in your bank account. Lottery winners may consider making investments to try and earn more money, but must continue to abide by normal tax laws in their country and should consult a financial expert to make sure any investment is tax-efficient.
Gifts to Friends/ Family
It is natural for a lottery winner to want to help out their family or friends if they receive a large windfall, but there are important implications associated with sharing money around. Laws are different around the world but in the UK, for example, you can gift up to £3,000 tax-free each year per recipient, under the annual exemption rule.
Any amount placed in a Trust Fund over £325,000 from individuals or £650,000 from couples, incurs inheritance tax of up to 40%. Money passed on to family or friends is still regarded as part of the winner’s estate and recipients would have to pay tax if the winner dies within seven years. Winners can add the same amounts to the fund every seven years to avoid going over the threshold.
Financial Advice
It is sensible to speak to a financial advisor or expert in international tax if you win a large lottery prize, as everyone’s personal situation is unique and there are differences in the laws around the world. But the prospect of tax should not put anyone off the idea of playing a lottery. If you win a sizeable prize – maybe even achieving millionaire or multimillionaire status – you would still have plenty of cash left over even after paying whatever lotto taxes might become due.