Did you win The Lottery?
The Taxman Wants His Cut!
The Tax Man – Song by the Beatles
Lottery Earning Taxation is Certain
One thing is for sure. If you win a lottery prize, you will have to pay taxes. That is unavoidable. This is the situation: The IRS considers all financial betterment a taxable event. So, theoretically, all lottery earnings are taxable. It is just that at this point, so far in tax collection techniques, some lottery earnings are too small for bothering with the tax effort. That may change though.
However, if you are browsing this website, for sure you are in the category of getting taxed by both the State of Oregon or Washington, and the Internal Revenue Service. In other articles, I will focus in more detail on the lottery taxes for the State of Washington (Washington Lottery), and the Federal Government (IRS).
Lottery Earnings of Up To $1250
Theoretically, the smaller prizes should be taxed, but as mentioned above, because of practicality, the state does not bother to tax such small lottery earnings. In addition, they are cashed at the establishment that sold the winning lottery ticket.
Lottery Earnings of Over $1250 Up to $5000
Any winning over $1250 from the Oregon Lottery is immediately taxed 8%. This deduction is unavoidable because all larger lottery winnings are paid directly by the Oregon Lottery Organization, any lottery price above $1250 is taxed 8%. Thus, if you, for example, win a lottery prize of $2000, you will receive a check for $1840, with is 92% (100% – 8% = 92%) of the face value of the lottery prize face value.
Lottery Earnings of Over $5000
Starting anything over $5000, Oregon Lottery organization automatically deducts both the 8% state tax and the 27% Federal tax. Thus, the total deduction off of the face value is 35% because 8% + 27% = 35%.
For example, if someone wins, for example, a $10000, the Oregon Lottery will issue a payment of $6500. That is 65% (100% – 35%) of the $10000 lottery ticket face value.
Paperwork and Filing Taxes
In another article I will focus on detail on the paperwork and taxes. For the moment, keep all the paperwork and do your taxes just right. Otherwise you may be over taxed.