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Can someone tell me what I would need to do if I win a million dollars on a scratchcard while I am in Colorado next month, as I believe there is a gambling tax treaty between the UK and US and I do not think I would need to pay the federal tax of 30% as gambling winnings are tax free in the UK

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    It is "If I win" Pete – Daniel Aug 7 '18 at 14:55
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According to the Colorado Lottery web site FAQs, non-citizen lottery winners will be taxed at 34% (30% federal + 4% state).
I think you'll find that the tax treaty between the US and UK only covers income and capital gains taxes, not gambling.

  • Is the 30% a tax rate or a tax-withholding rate? – DJohnM Aug 7 '18 at 1:30
  • @DJohnM - the exact wording from the FAQ is "Non-citizens are taxed at 34% (30% Federal; 4% State)". Elsewhere there is mention of "tax withholding", but not in connection with non-citizens. I guess that if the non-citizen got themselves an ITIN and submitted a tax return then maybe they'd potentially get a refund ... ? – brhans Aug 7 '18 at 3:57
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The safe position would be to compute three things:

  1. What is the maximum tax you'd pay in federal taxes? (30% per @brhans answer)
  2. What is the maximum tax you'd pay in state taxes? (4% per @brhans answer)
  3. What is the maximum tax you'd pay in UK taxes?

Add all of those up and set that money aside assuming that you'll have to pay it. If treaties, tax law, deductions, tax returns, etc. somehow reduce that amount then that is a bonus. If you owe the full amount in each category then you'll have the money set aside to pay it.

State lotteries in the US are highly regulated and the US IRS does not mess about. If you do hit a large jackpot the lottery agency will likely have the information and process to capture the tax. You should be able to find a local accountant or tax professional to verify this information for a modest hourly fee as well.

Don't worry about the taxes too much, your odds of owing taxes on a million dollar prize are are 1:720000. If it does happen, consider it a good problem to have.

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