lottery

New Pennsylvania lottery tax proposed

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate.com

I have my Mega Millions ticket for tonight’s May 19 lottery drawing. If I don’t win that — OK, when I don’t win — I’ll pick up a Powerball lottery slip for the drawing on May 20.
taxes-blog-new-pennsylvania-lottery-tax-proposedYes, I know the odds are not in my favor. But, like millions of Americans, I only throw away a few dollars when the jackpots are really big, like they are now.

The Mega Millions payout is an estimated annuity value of $173 million. If you take the lump sum payout, which most winners do, that comes to $106 million. The Powerball jackpot is an estimated annuity value of $121 million, or $75.7 million cash.

Tax due on lottery winnings

Longtime readers know that now’s the time I remind everyone about the tax consequences of winning the lottery. I say bring them on! I will happily hand over a portion of a huge jackpot to Uncle Sam.

Of course, I live in Texas, which doesn’t have a state income tax, so I don’t have to worry about those added taxes.

Many other gamblers, however, must share part of their good luck with state tax collectors.

New Pennsylvania lottery tax proposed

And if the governor of Pennsylvania gets his way, lottery players in the Keystone State will have to start paying state taxes on lottery winnings that exceed $600.

Currently, Pennsylvania lottery winnings aren’t taxed. It’s been that way since the gambling games came to the state in 1971. Pennsylvanians, however, must pay tax on money they win from other states’ lotteries.

Any tax proposal is risky, but Democratic Gov. Tom Wolf is taking a chance with the lottery tax. Pennsylvania is facing a projected deficit of $1.5 billion to $2 billion. Wolf’s office says the new lottery tax could bring in $15 million next year and $25 million by the 2019-2020 fiscal year.

Long odds on tax passages

The odds of Wolf getting his lottery tax are about as good as those for winning a jackpot. The state legislature, not to mention lottery-playing Pennsylvanians, oppose the tax.

Even some of Wolf’s fellow Democrats are against the change. Lottery winnings are tax-free, they note, to encourage people to play.

Why the state-push of gambling? Pennsylvania lottery proceeds go toward senior centers and meals, low-cost prescription assistance and free or reduced-fare transportation programs, rent rebates and care services.

Would an added tax on lottery winnings discourage you from buying tickets? Or would you just chalk it up to the cost of playing? Personally, it wouldn’t stop me from dropping a few bucks on a ticket. If I win, I’d have plenty to share, even with tax collectors.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

The First 5 Things You Should Do If (WHEN!) You Win The Lottery

Lottery TicketWhen local Westchester resident Kevin Buchanan, a construction work from Yonkers, bought a $20 scratch off ticket on Christmas morning he wasn’t expecting to win $5 million dollars! Deciding to take the lump sum payment, Buchanan ended up taking home $3.2 million dollars. Merry Christmas to him!

Buchanan has been very down to earth about his big win: he has decided to pay some bills, buy a home and splurge on a Cadillac Escalade. Early retirement? Not for this family man, he’ll keep on working.

The first 5 things you should do when you win the lottery:

1.      Take a deep breath and do not rush to make ANY decisions regarding this new found money. There must be many thoughts going through your head, many of which will be imprudent and financially unwise. Yes you should have some fun now with a portion of your winnings, but don’t rush to make huge life changing decisions with the bulk of winnings without a well thought-out plan.

2.      Meet with a CPA to understand tax ramifications of taking a lump sum now or a payout from the lottery over time. Get some advice on future planning, including estate planning so your family is provided for.

3.      Meet with an attorney to make sure your will is up to date and provides for your family according to your wishes.

4.      Find a trusted financial advisor. Your attorney and CPA may be good sources of referrals. Interview three different advisors before selecting one. This is important as you want your new found money to work for you.

5.      Realize how fortunate you are to be in this position. Find some causes close to your heart that you can make a difference for.

We at Herman & Co, CPA wish Kevin and his family the best and are proud to see he is making the smart choices and not fleeing these winter storms to hole up on some tropical beach….yet.

Contact Paul Herman at (914) 400-0300 for a free 30 minute no obligation consultation about your individual or business needs.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.