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Lottery Taxes state/local - Out of state

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rlevins

Both NJ and PA do not have state/local txes on Lottery winnings but what about when a NJ resident wins in PA or a PA resident wins in NJ? Does any one have any info on this.

thanks

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rlevins

Here is reply from NJ lottery.

From:Public Info [mailto:Publicinfo@lottery.state.nj.us]
Subject: RE: Taxes on Lottery winnings

 

 

No, but winners of the Pennsylvania and New York State lotteries are subject to their laws and any applicable taxes.

 

 

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Chewie

What is the purpose of your thread? To answer your own preposition?

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rlevins

Sorry, If you can't see the purpose, I can't  help

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rlevins

On second thought, Let me answer for those who can find the answer. I do not know how these state/local taxes will work in case of winning out of state lottery, so I asked the question in forum and at the same time I sent an email to both NJ & PA lottery for the answer (whatever they can say). I got the reply from NJ lottery and I posted here so that any one interested to know this (useful or not useful) will know this. I will post again when and if I get reply from PA lottery.
Thanks

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Preppy

General information about state taxes

 

See:

 

https://www.lotterypost.com/thread/122850/6

 

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Chewie

Sorry, If you can't see the purpose, I can't  help

The repetitive double negatives in your original statement were confusing.  However, the answer is NO.  Been asked at least three times, always results in the same answer.  Neither state taxes gambling winnings.

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Preppy

Both NJ and PA do not have state/local txes on Lottery winnings but what about when a NJ resident wins in PA or a PA resident wins in NJ? Does any one have any info on this.

thanks

Rlevins,

 

Let me make sure I understand your question.

 

Rlevins, you are a New Jersey state resident. New Jersey state residents and non-residents do not have to pay taxes on New Jersey Lottery winnings. You bought a lottery ticket in Pennsylvania that won. Pennsylvania state residents and non-residents do not have to pay taxes on Pennsylvania Lottery winnings.

 

Does a New Jersey state resident have to pay state taxes (New Jersey) on the out of state lottery winning (Pennsylvania Lottery winnings)?

 

New Jerseystate resident:

Yes, you do have to pay New Jersey taxes on Pennsylvania Lottery winnings.

 

http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb20r.pdf

 

Under the provisions of N.J.S.A. 54A: 5-1(g), all gambling winnings, whether they are the result of legalized gambling (casino, racetrack, etc.) or illegal gambling, with the exception of New Jersey Lottery winnings, are subject to the New Jersey Gross Income Tax for resident taxpayers. The lottery winnings of residents are subject to tax no matter where these winnings are received.”

 

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rlevins

thanks Preppy. By any chance do you have any reference about PA not charging taxes to non residents? PA lotter site does say that there is no tax for residents but it does not say anything about non residents.

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Chewie

New Jerseystate resident:

Yes, you do have to pay New Jersey taxes on Pennsylvania Lottery winnings.

http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb20r.pdf

“Under the provisions of N.J.S.A. 54A: 5-1(g), all gambling winnings, whether they are the result of legalized gambling (casino, racetrack, etc.) or illegal gambling, with the exception of New Jersey Lottery winnings, are subject to the New Jersey Gross Income Tax for resident taxpayers. The lottery winnings of residents are subject to tax no matter where these winnings are received.”

Very astute.  I've looked at that numerous times and did not read it that way - until now.  Some time you see what you want to see, regardless of what the words say.

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Preppy

thanks Preppy. By any chance do you have any reference about PA not charging taxes to non residents? PA lotter site does say that there is no tax for residents but it does not say anything about non residents.

http://www.revenue.state.pa.us/revenue/cwp/view.asp?a=3&q=203451&revenueNavDLTEST=%7C689%7C

“** Effective with taxable years beginning after December 31, 2003, gambling winnings – other than PA Lottery Winnings – sponsored by Pennsylvania organizations or firms are taxable to nonresidents.”

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rlevins

Thanks Preppy for the useful info. From this it seems that NJ resident's will not charged PA tax if the winnings are from PA lottery. Now the next question would be that "Are the MUSL lottries treated as part of PA lottery", which I guess is that they are treated as part of PA lottery.

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acme

Hi,

But what happens if Canadian or Mexican citizen wins big pot (if he or she lives in his/her country)? Does he/she have to pay just withold tax plus state tax or does he/she have to pay more on 15th april next year?

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Preppy

Hi,

But what happens if Canadian or Mexican citizen wins big pot (if he or she lives in his/her country)? Does he/she have to pay just withold tax plus state tax or does he/she have to pay more on 15th april next year?

Good, but a tricky question. I looked into this situation last year and this year, but as a US citizen winning a lottery in a foreign country. I wanted to see if the claims that foreign lotteries are tax free and claims that foreign lotteries are tax free to US citizens were true. Unfortunately, most of the claims are incomplete (misleading or half right and half wrong) answers!!!!

Federal withholds tax

However, what I found does apply to Canadian, Mexican, or other foreign citizens.A foreign citizen’s US tax obligations are determined by whether he or she is classified as a resident alien or non-resident alien. Non-resident aliens are subject to a flat Federal withholdings at 30% on the gross proceeds from gambling won in the United States. “The United States also has gambling winnings tax treaties with a number of foreign countries. Under these treaties, residents of foreign countries are taxed at a reduced rate, or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.”

The last time I looked on the IRS website, Mexico was not one of the 23 countries listed as exempted by treaty. I would assume, since Mexico is not listed as exempted, Mexican citizens would have to pay a flat Federal withholdings at 30% or at a reduced rate. Furthermore, many of the winners of the California state lottery are foreign citizens, especially Mexican citizens. California state lottery officials usually quote the 30% rate for Mexican citizens.

According to the IRS website, gambling winnings of Canadian residents are subject to a flat Federal withholding at 30%. The treaty does state various exemptions exist.

State Tax

Some states don’t tax resident aliens or non-resident aliens on lottery winnings, while others do tax resident aliens and non-resident aliens on lottery winnings. The state tax on lottery winnings ranges from 2% in Nebraska to 10% in Montana. Furthermore, some states have lottery tax reciprocity agreements with other states and countries, but some don’t. The tax treatment of lottery winnings for non-resident aliens depends upon the state involved, the type of visa issued (diplomatic, immigration , student, work, and etc. ), the state’s tax laws concerning lottery winnings for non-resident aliens, and the tax reciprocity agreements between or among the states and countries in question.

For example, Arizona Lottery withholds a 6% state tax for non-resident aliens, but 5% state tax for U.S. citizens or resident aliens. Connecticut’s 5% state income tax is required on all Connecticut lottery winnings, regardless of residency.

Are you a resident alien or non-resident alien?

- Resident alien - If you are a foreign citizen with a US immigrant visa (“green card”) or you were in the U.S. for 183 days or more

  • Worldwide income is reportable.
  • Withholding tax requirements are the same as U.S. citizens.

- Non-resident alien - If you are a foreign citizen and you were in the U.S. for less than 31 days

  • Reportable income is income received from U.S. sources only.
  • Withholding tax requirements are different (30% rate).

- Take the substantial presence test - If you are a foreign citizen and you were in the U.S. for 31 to 182 days

The time limit that establishes a foreign citizen as resident alien or non-resident alien is different for each visa.

File your U.S. return by April 15, or by June 15,

Foreign citizens have to file a U.S. return by April 15, if the foreign citizen was an employee in the U.S. and received wages subject to withholding.

Foreign citizens (if classified as a non-resident alien) have to file a U.S. tax return by June 15.

Pay More Next Year

It all depends on how you are classified by the IRS (resident alien or non-resident alien). To my understanding the tax rate (30%) for non-resident aliens is one time event if you picked cash (the one time payment). If you picked annuity, I assume each payment would be taxed at the 30% rate or at a reduced rate. However, I am pretty sure there is some legal case where a foreign citizen was taxed as a US citizen because the individual stayed beyond the strict time limits that are used to establish a non-resident alien’s tax status.

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