If you take your winnings as one lump sum, the IRS will only tax you for that specific tax year. Taxpayers can generally either choose to receive their winnings as one lump sum payment or in yearly installments. The amount you will have to pay in taxes depends on how you choose to receive your winnings and the type of lottery won. It’s no secret that winning the lottery is exciting! Whether it’s a scratch-off, draw game, or a raffle prize, it’s essential to know how the IRS will tax those winnings. But did you know that it also includes the fair market value of prizes like cars, trips, etc.? So, if you made a deal with Wayne Brady, got lucky betting the ponies, or took on losses betting on the Lions, you need to make sure you’ve got your house of cards in order come tax time. Gambling income includes winnings from lotteries, raffles, horse races, sports betting, casinos, and cold hard cash, which is a standard assumption. What Counts as Gambling Income in the Eyes of the IRS?
While that brand new sports car or fancy yacht may look enticing, it’s important to remember that the IRS wants their fair share. After a big win on a lotto ticket or after a great night at the casino, the last thing you’re probably thinking about are those pesky tax obligations that come along with it.
