New York Tax Laws for Lottery Winners
- The New York Lottery began in 1967 to raise funds for public education in the state. Players must be at least 18 years to take part in the draws. Games include Mega Millions, drawn on Tuesdays and Fridays, and Lotto, drawn on Wednesdays and Saturdays. Players may also take part in daily games and buy scratch cards.
- Residents of New York State must pay state income tax on any prize received in the New York State Lottery. Residents of New York City or Yonkers may also have to pay city income taxes. Anyone who moves into New York State and who has won a prize while a non-resident need not pay tax if his winnings are less than $5,000. The Lottery authorities withhold tax at the highest rate for the year of payment, without taking account of any personal or other tax allowances.
- If a non-resident of New York State wins a prize above $5,000, the law regards the prize as New York source income, and therefore the prize is taxable. Winnings under $5,000 are not subject to New York income tax. Certain other states tax prize winners and, to avoid double taxation, most states will provide a credit if residents can show that they have paid the tax in New York.
- Individuals often pool funds to buy lottery tickets on an informal basis. In New York, multiple winners must form a legal entity such as a trust, partnership or corporation before claiming the prize as a group. For tax purposes, each individual must then record his share of the prize passed on to him by the legal entity.
- The New York State Lottery must by law inform the IRS of all prizes if the proceeds amount to a sum greater than $600 and more than 300 times the amount of the original wager. The IRS will then issue Form W-2G to the winner.
