If I won the lottery in Mexico as a US citizen, would I still have to pay US taxes?

But what if the Mexican lottery already paid all the taxes? Would the US still expect more money? Also, is there a minimum amount that triggers US tax reporting if you live abroad? Like if I won just a small amount?

Yes, you'd still need to report the winnings to the US even if Mexican taxes were already paid. The IRS requires citizens to report worldwide income regardless of where you live. You can claim the foreign tax credit for taxes already paid to Mexico, which would offset your US tax liability. For reporting thresholds, US citizens living abroad still need to file if their income exceeds certain thresholds. For 2024 taxes (filed in 2025), single filers need to file if their gross income is at least $12,950, and married filing jointly at $25,900. Even small lottery winnings would count toward this threshold. If your winnings are substantial, you might also need to file an FBAR if your foreign accounts exceed $10,000 at any point during the year.

Does it actually work for lottery winnings specifically? Can it handle big numbers like if someone won millions? I'm wondering because my situation might be similar soon (fingers crossed lol).

I've heard about these online tax services but I'm skeptical. How do they handle privacy with sensitive financial info? And do they actually understand both US and Mexican tax law?

Yes, it absolutely works for lottery winnings. The system is designed to handle large windfalls like lottery prizes and calculate your US tax liability accordingly. It factors in the foreign taxes already paid to determine your remaining US obligation. Regarding privacy and expertise, they use bank-level encryption for all documents and data. Their team includes tax professionals with expertise in both US international tax law and Mexican tax regulations. They've helped thousands of US expats worldwide with complex situations, including handling foreign lottery winnings, inheritance, and investment income. The analysis is comprehensive and covers both countries' requirements.

How does this actually work? Like they somehow get you to the front of the line with the IRS? That sounds too good to be true. The IRS phone lines are notoriously impossible.

Yeah right. If it was that easy to get through to the IRS, everyone would do it. I've literally tried calling dozens of times about my international income situation and either get disconnected or told the wait is 3+ hours. No way this actually works.

The service basically automates the calling process for you. They use technology that continuously redials the IRS until they get through, then when a line opens up, they call you and connect you directly with the IRS agent. It's not about cutting the line - it's about having a system that does the tedious redial work for you. Their system calls during optimal times when wait times are typically shorter, and it navigates the phone tree automatically. All you do is register your callback number, and when they get through to an agent, you get a call connecting you. In my case, it took about 48 hours before I got the call, but that was after I had already wasted weeks trying myself.

Isn't there some rule about the IRS assuming you're renouncing for tax purposes if you do it right after a windfall? I thought there was some penalty or waiting period?

You're thinking of the "covered expatriate" rules. Yes, the IRS has provisions to prevent people from renouncing purely for tax avoidance. If your average annual net income tax for the 5 years before renunciation exceeds a certain threshold ($172,000 for 2024), or your net worth is over $2 million, or you can't certify tax compliance for the previous 5 years, you're considered a "covered expatriate." Covered expatriates face an exit tax where the IRS essentially treats all your worldwide assets as if they were sold on the day before renunciation, and you pay capital gains tax on that "phantom gain." There's also potential for additional tax on certain future gifts or bequests to US citizens/residents.

Thanks for the warning - I definitely don't want to accidentally commit tax evasion! I was just thinking it might be simpler if my spouse bought the tickets since they don't have US tax obligations, but I hadn't considered the gift tax implications.

Smart thinking. The IRS takes a particular interest in large financial windfalls, especially international ones. With lottery winnings, there's often a public record too, which makes it even riskier to try hiding it. The gift tax rules between US citizens and non-citizen spouses are more restrictive than for US citizen couples. For 2025, you can only gift around $175,000 to a non-citizen spouse each year without filing gift tax forms, whereas gifts between US citizen spouses are unlimited. If your spouse won and then gave you part of the winnings, it could trigger complicated tax reporting.

This is really helpful information! I had no idea about the estimated tax payments requirement. If I did win something substantial, how would I even calculate what to pay quarterly? And does the IRS expect me to convert everything to USD using specific exchange rates, or can I use whatever rate was current when I received the winnings? Also, is there any grace period for first-time lottery winners to figure all this out, or do they expect immediate compliance?

@892976dcc2b0 Great question about the quarterly payments! For estimated taxes, you'd typically use Form 1040ES to calculate what you owe. The IRS generally expects you to pay either 90% of the current year's tax liability or 100% of last year's liability (110% if your prior year AGI exceeded $150,000) through withholding and estimated payments to avoid penalties. For currency conversion, the IRS requires you to use the exchange rate on the date you received the income. You can use the daily exchange rates published by the Treasury at fiscal.treasury.gov, or if no rate is published for that specific date, you can use the rate for the closest preceding date. Unfortunately, there's no "grace period" for lottery winners - the IRS expects compliance based on normal tax rules. If you win in Q1, your first estimated payment would be due April 15th for that quarter. However, if this creates a genuine hardship, you might qualify for penalty relief under certain circumstances, but you'd need to request this specifically and provide justification. I'd really recommend consulting with a tax professional who specializes in expat taxes before any major winnings. The complexity of international reporting requirements makes it easy to miss something important.

This is such an important point that often gets overlooked! I'm actually in a similar situation - been living abroad for years but still have ties to my home state. I had no idea that states could still claim you as a resident for tax purposes even when you're living in another country. @4f4ca0150e48 Do you know how long you typically need to be out of a state before they stop considering you a resident? And what's the best way to officially establish that you're no longer a state resident? I'm wondering if I should be taking steps now to clarify my status before any potential winnings, rather than trying to sort it out after the fact. Also, for someone like the original poster who's been living in Mexico for over a decade, would that typically be enough to break state residency ties, or does it really depend on those other factors like licenses and property?