The lottery is fun to play – thinking about what we’ll do if we win – but it also serves an important purpose. In Arizona, the money from ticket sales go to programs and organizations that help education, health and human services, the environment and economic and business development.
According to GoBankingRates.com, for one of the most popular lotteries in the United States, Mega Millions, your odds of winning are about 1 in 176 million. If you’re playing a single-state lottery, your odds increase to 1 in 42 million.
To put that in perspective, you are about 30,000 times more likely to experience a bathroom injury than you are to win the Mega Millions jackpot, 250 times more likely to be struck by lightning and 80 times more likely to die by shark attack.
While the odds are low that we’ll win, it’s still exciting to play and we can always remain hopeful that it will work in our favor. However, should you win, there are a few legal implications to consider, and it’s always a good idea to consult with an attorney in your state.
Redeem your prize. Arizona Lottery retailers will redeem prizes up to $100 and may redeem up to $599. Prizes of $600 or more must be claimed at the Arizona Lottery office. If you hold a winning ticket, you have 180 days from the draw date, purchase day or game-ending date for scratchers.
Once the ticket is expired, it cannot be redeemed. Keep in mind, if you lose the ticket you are out of luck. Remember to sign the back and fill out your address as soon as you buy the ticket; otherwise anyone holding the ticket can redeem it.
Protect your privacy. In Arizona, the names of persons or legally formed entities that are paid lottery prizes or winnings of $600 or more are held confidential for 90 days from the date the prize is awarded. Winners of $100,000 or greater may elect to keep their name permanently confidential.
Decide between cash or annuity. Winners have 60 days from the claim date (the date the ticket is presented for validation) to choose either the cash or an annuity. If you choose cash, the lottery will issue a check once the ticket is validated.
The cash value is approximately half the advertised value of the jackpot and is paid in one lump sum. But if you select an annuity, you are paid a lump sum and 29 annual graduated payments. This decision is best discussed with a lawyer, CPA or financial planner.
Pay your taxes. The law considers lottery winnings taxable income, for both federal and state tax purposes. Winnings are taxed the same as wages or salaries, and the total amount the winner receives must be reported on their tax return each year.
Before the winner receives any money, the IRS automatically takes approximately 24% of the winnings and you pay the rest when filing your taxes. Arizona is one of only two states that tax the winnings of people who live out of state. Arizona automatically withholds 4.8% for state taxes on lotto winnings.
It’s important to make sure we are prepared to abide by the laws of winning. To ensure you are doing what is best for you and your family, consider consulting with an attorney.
It’s also not a recommended investment strategy. However, winning the lottery is a good reason to revisit your estate planning strategy. Information: arizonalottery.com.
Jennifer Sellers is a senior member at The Cavanagh Law Firm specializing in employment and corporate law, representing clients on a variety of employment matters.