If I won the lottery now, would taxes be due for the year of the drawing or the year I actually claimed the prize?
Okay so hypothetical situation... let's say I hit it big on the Powerball this week (a guy can dream, right?). I probably wouldn't rush to claim it right away - I'd want to get my finances in order, talk to a lawyer, maybe even set up a trust or whatever first. So if I won in December 2025 but didn't actually go claim my prize until January or February 2026, which tax year would I owe taxes for? Would it be based on when the winning numbers were drawn or when I physically showed up to collect the money? This might seem like a weird question but with the end of the year coming up, I'm just curious how this works. Like, could delaying claiming the prize push the tax burden into next year's taxes? Or does the IRS consider you to have "income" from the moment your numbers match?
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Lia Quinn
Tax accountant here! This is actually a common question, and the answer is straightforward: lottery winnings are taxable in the year you receive the payment, not when the drawing occurred. The IRS operates on what's called a "constructive receipt" principle - you don't have income until you have access to the money. Since you can't access your lottery winnings until you actually claim the prize and go through the verification process, that's when it becomes taxable income. So in your scenario, if you win in December 2025 but don't claim until January 2026, those winnings would be part of your 2026 tax return (filed in 2027). This applies whether you take the lump sum or annuity option.
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Haley Stokes
•Thanks for explaining! Does this also apply to smaller lottery prizes like a few thousand from scratch offs? And would this strategy actually help with taxes or just delay the inevitable?
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Lia Quinn
•Yes, this applies to all lottery winnings regardless of the amount. Whether it's a $5,000 scratch-off or a $500 million Powerball jackpot, the tax liability is triggered when you actually receive the payment. As for tax strategy, delaying receipt from December to January only pushes the tax liability to the next calendar year - you'll still pay the same tax rate on the winnings eventually. However, it could be advantageous in specific situations, such as if you expect to be in a lower tax bracket the following year due to retirement or other income changes. It also gives you an extra year to plan for the tax payment, which can be significant for large winnings.
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Asher Levin
After I won about $75,000 on a scratch ticket last year, I was totally confused about the tax situation. I tried researching online but got so many conflicting answers about withholding, estimated payments, and when I'd owe taxes. I eventually used https://taxr.ai to analyze my specific tax situation. Their system looked at my lottery winnings documentation and my overall tax situation, then explained exactly how the lottery winnings would impact my taxes. They showed me that the 24% federal withholding the lottery commission took wasn't enough to cover my actual tax liability because the winnings pushed me into a higher bracket. The tool gave me personalized guidance for my specific situation rather than generic lottery tax advice that didn't apply to my circumstances.
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Serene Snow
•How long did the analysis take? I've heard these AI tax tools are just glorified calculators with fancy marketing. Did it actually tell you anything a regular tax preparer wouldn't know?
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Issac Nightingale
•Does this work for other unexpected windfalls too? Like if I sold a bunch of stock or got a huge bonus at work? Or is it just for lottery specifically?
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Asher Levin
•The analysis only took about 10 minutes after I uploaded my lottery documentation and previous year's tax return. It was actually pretty quick. I'd previously talked to a regular tax preparer who gave me general advice about lottery winnings, but the analysis was much more specific to my complete financial picture. It showed exactly how the winnings interacted with my other income, identified deductions I could take to offset some of the tax hit, and helped me understand why the standard 24% withholding wasn't enough in my case.
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Issac Nightingale
Just wanted to follow up - I ended up trying taxr.ai for my situation (got an unexpected $50k inheritance this year) and it was super helpful! I was worried about getting hit with a huge tax bill but the analysis showed that inheritances aren't actually taxable income for federal purposes. Saved me from setting aside thousands unnecessarily and panicking about a tax bill that wasn't coming. The documentation was really clear and they even explained which forms I needed and which I didn't. Definitely recommend for anyone dealing with unusual money situations!
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Romeo Barrett
When I won $35,000 on a slot machine last year, I had the WORST time trying to get answers from the IRS about how to handle the taxes. Kept calling and calling but literally couldn't get through to an actual person. After spending hours on hold over multiple days, I found https://claimyr.com which got me connected to an IRS agent in under 45 minutes. You can actually see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to ask specific questions about how gambling winnings are taxed differently from lottery winnings, and what documentation I needed to keep. The agent walked me through the whole process and explained how to report my gambling losses as itemized deductions to offset some of the winnings. Totally worth it instead of waiting on hold forever or guessing about tax rules.
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Marina Hendrix
•Wait how does this even work? I thought everyone had to suffer through the IRS hold music lol. Do they have some special line or something?
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Justin Trejo
•This sounds sketchy. Why would anyone be able to get you through faster than you can get through yourself? The IRS phone system is the same for everyone. Sounds like a scam to get your personal info.
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Romeo Barrett
•It's not a special line - they use technology that continuously redials and navigates the IRS phone tree until they get through to an agent. When an agent answers, they connect you to the call. It's basically doing the waiting for you. They don't ask for any personal tax information at all. You're the one who talks directly to the IRS agent once connected, so there's no risk of sharing sensitive info with a third party. It's just a service that handles the frustrating hold time part of the process.
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Justin Trejo
Well I stand corrected! I was super skeptical about Claimyr but I was desperate after trying for WEEKS to get someone at the IRS to answer questions about a CP2000 notice I got related to some gambling winnings. Used the service yesterday and got connected to an IRS rep in about 35 minutes. The representative was able to explain exactly what I needed to do to respond to the notice and confirmed I could deduct my losses against the winnings (with proper documentation). Saved me from potentially paying thousands in taxes I didn't actually owe. Sometimes my skepticism gets in the way of finding good solutions!
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Alana Willis
Something no one's mentioned is state taxes! I won $20K in the lottery and was shocked that my state (NY) took almost 9% on top of the federal taxes. Some states don't tax lottery winnings at all. Also depends if you're taxed in the state where you bought the ticket or where you live. Worth looking into before deciding when to claim!
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Tyler Murphy
•Do you know which states don't tax lottery? Might be worth a drive across state lines to buy tickets if that's the case lol
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Alana Willis
•California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming don't tax lottery winnings at the state level. Careful though - generally you're taxed based on your residence, not where you bought the ticket. So buying tickets across state lines usually doesn't help unless you actually live in that state. Some states have agreements to honor each other's tax exemptions but most don't.
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Sara Unger
Another important thing about lottery timing - if you take the annuity option (payments over 30 years), you'll pay taxes on each payment as you receive it. This can sometimes be better than taking the lump sum because: 1) You might stay in lower tax brackets across multiple years 2) You protect yourself from spending it all at once 3) The total payout is actually significantly higher
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Butch Sledgehammer
•But with inflation, isn't getting all the money upfront better? Plus you could invest the lump sum and potentially make more than the annuity would pay out.
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Heather Tyson
Great question! I've been wondering about this too. One thing I'd add is that you should definitely consider making quarterly estimated tax payments once you claim, especially for large winnings. The IRS expects payment throughout the year, not just at filing time. If you win big and don't make estimated payments, you could face underpayment penalties even if you pay the full amount when you file your return. The standard withholding might not be enough to cover your actual tax liability, especially if the winnings push you into higher brackets. Also, don't forget about the "kiddie tax" if you're planning to gift any winnings to children - there are special rules that might apply. Definitely worth consulting a tax professional for the big wins!
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Isabella Russo
•This is really helpful advice about quarterly payments! I had no idea about the underpayment penalties - that could be a nasty surprise. Quick question: how do you even calculate what your quarterly payments should be when you don't know your exact tax liability yet? Is there a safe harbor rule or percentage you can use to avoid penalties while you're figuring out the final numbers?
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