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Tax Implications of Lottery Winnings

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You won $1,000,000 in the state lottery and had a choice to either receive $50,000 a year for 20 years or $560,000 now. What are the tax implications for both of the aforementioned options?

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Solution Summary

This 220-word solution discusses the tax implications of lottery winnings if received via lump sum or via instalments, using references to supplement the discussion.

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Winnings from a lottery are an example of a windfall income and subject to tax. The amount of taxes the winner needs to pay depends on which method he prefers to receive the winnings by: lump sum or installment. How these are taxed is governed by IRS Publication 525, which can be accessed at ...

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