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.
Yes, 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.