5

If you've been paying attention (at least in the US) for the past couple days, you are aware of the Mega-Millions lottery drawing that is coming up which is conservatively estimated at $500m $640m! At the moment, this is an overwhelmingly large world record for a lottery jackpot!

I, like numerous others, have bought my very first lotto ticket but I have a question. I live in one state (North Carolina) but I purchased the ticket in another (South Carolina.) Assuming the winner is in the same circumstance, where should they file state taxes for their winnings-- with the state they live in (NC, in my case), the state they won in (SC) or, unfortunately, both?

  • If you win in another State than move to that State and pay taxes only at that State. Why stay in a State that will take money you didn't win in that State? – user9866 Apr 24 '13 at 19:10
6

Although I am not a tax professional, and in this case you would be better off with a professional advice, my understanding (at least of Arizona, New York and California individual tax regulations that I've been dealing with) is that you only pay taxes in the state in which you're domiciled.


Lottery winnings are payed by States/State-run corporations and as such sourced to the State that pays it. Buying a ticket in SC links you to the lottery run in that State, even if you live in another. You'll be claiming your winnings in SC, not in NC, and the winnings will be sourced to SC, not NC. As such SC will be taxing them. NC will be taxing them as well, since you're NC resident.

  • Don't most states explicitly tax gambling winnings though? – Andy May 14 '15 at 23:27
  • @RLH Corrected my answer, please take a look – littleadv Jul 27 '16 at 15:50
  • Can one conclude that it is best to purchase lottery tickets in the state in which you live, to avoid double taxation? – TTT Jul 27 '16 at 16:01
  • @TTT that's a reasonable conclusion. Note that some States don't tax lottery winnings from within the State, but do tax foreign lottery winnings. – littleadv Jul 27 '16 at 16:38
8

Don't worry, if both states can make a claim, they will. It may even depend on the states involved. Some states have reciprocity and others do not. That is why with this much money involved the winner should not be in a rush to claim the money. Get quality advice if you win.

  • 4
    Good point. If you do win the lottery, I think you'd want advice better than a random person on the Internet will provide. You can afford it! – JohnFx Mar 30 '12 at 21:01
  • 4
    This is true, but people often first look online to get an idea for answers to questions, even if they are this important. I really like the StackExchange network, and I ask so that this site can be more frequently indexed by search engines. – RLH Mar 30 '12 at 21:23
-2

Quick, move to the state where the ticket was bought. Set up a resident and then claim the prize. Then, move back home, if you want. IMO

But both states will still try to make a claim for the tax money, if you give them a reason to try.

They have nothing else to do, but look for revenue.

  • It might be difficult to do quickly. You would have to convince the states that the move was real. Change every thing to the new state, get the check, then move again after waiting some period of time. You would need professional advice to make sure everything was in order, or you could risk penalties, fees, and even jail. – mhoran_psprep Jan 21 '15 at 4:39
-3

You will pay taxes in both states!!! Where you bought the ticket as soon as you claim it. and your residence state at the end of the year! Its called state Income Tax.

  • Suppose that (like me) you live in a state - Nevada - that doesn't tax income, but buy the ticket in a state like California, which does? – jamesqf May 15 '15 at 0:28
  • You have any reference or citation for this assertion? – JoeTaxpayer Oct 29 '15 at 14:59

protected by Chris W. Rea May 14 '15 at 22:14

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