Suppose you win the MegaMillions Lotto. Fine you pay your income tax, but what about state tax. I suppose if you live and work in a state like Illinois it’s clear cut, you live here you bought the ticket in Illinois you pay state and local taxes on winning.
But what if you live in NJ and buy the ticket in NYC because you work there. Or what if you win in Illinois and want to move to Texas which has no state income tax?
It is my understanding (no cite here) that you pay income tax for the state you live in. However, it may be important where you buy your ticket. For instance, here in New Jersey you do not pay income tax for New Jersey lotteries. That means if you bought your Mega ticket in New York, you would pay NJ tax on it (which is why I always buy those tickets in NJ).
If you accepted your prize as an annuity I believe (again, no cite) that you pay according to where you live when you receive your payment, but I am not certain of this at all.
PA doesn’t on the PA lottery. I know that much. I would guess that its the same way on Powerball but I cannot say for certain.
If you live in a state that does tax lottery winnings, I don’t know if you could escape by moving afterwards. Since the lottery ticket is dated, the state theoretically could say that you won the lottery while you were a resident of that state, unless that you could prove that you were a resident of the tax free state prior to the drawing date.
Some of the lottery drawings allow annuity payments instead of a lump sum. if you won and took the annuity payment, you could move, and possibly have to pay state and local tax on your first installment but then be tax free on future installments.
And it’s a very simple formula. The Feds take 25%, you keep the rest. So, if you take the cash value of the current Mega Millions (I think it was $71 million this weekend), you get 45-55% of the total. For ease of math, let’s make that $36 million. The feds get their $9 million, and you have $27 million for yourself.