Federal tax laws just adopted by Congress offer a mixture of the bitter with the sweet for lottery winners, especially those who live in states with high taxes. The top income tax rates have been lopped, but the new law constrains the ability to deduct state taxes.
Things are better in California, Texas and Florida, which don’t subject lottery winnings to the state tax.
So, the changes may be a wash for most lottery winners. The changes roughly offset,” Steven Rosenthal, a senior fellow at the Washington-based Tax Policy Center told the Associated Press. “The new tax bill will not give any benefit to most lottery winners.”
Of course, since the odds of actually winning a Mega Millions game are minuscule, much worse than the odds of being struck by a meteor, most people will never know the difference. But the one winning the half billion or so dollars, now he or she definitely will!
Most Mega Millions and Powerball winners opt to be paid in cash, rather than take the annuity over 29 years. When they do that they end up paying 37 percent of the total in federal taxes.
Under the new law, state income taxes can only be deducted if they are $10,000 or less. Under the old law that deduction was unlimited.
