Jackpot lotteries are an increasingly popular form of entertainment that offer large prizes to its winners. Payment can either be spread out over 29 years or taken as one lump sum payment; many states use part of these proceeds for public education funding purposes.
An unexpected jackpot win can either be a blessing or a curse, depending on how it’s handled. To ensure a smooth transition, surround yourself with experts such as lawyers and financial advisers as soon as possible.
Origins
The jackpot lottery is an increasingly popular form of gambling that offers large cash prizes. Although its origins remain unclear, its rise to fame began after poker players started using it as a term to refer to an accumulation of funds when no player achieved specific hands such as pair of jacks. Since then it has come to symbolize an opportunity for life-altering wealth; simply having a chance of winning one gives many hope for future fortune.
Gloria Mackenzie of New Hampshire won an impressive $278 Million Powerball jackpot. Rather than choosing to receive their winnings as lump sum payments, which are lower due to taxes being applied against winnings, Gloria opted for an annuity payment option – meaning her actual prize won was less than advertised!
Super-sized jackpots help drive lottery sales and bring lottery games free publicity on news websites and television broadcasts, but can make prizes harder to win as less tickets are sold due to such large pots.
Formats
The jackpot prize in a lottery may take the form of cash or goods and has many advantages for organizers: this reduces risk and encourages more people to join, while an alternative method might involve offering multiple prizes with variable winning percentages as prizes.
If no one wins the jackpot during one drawing, it rolls over into the next drawing – this ensures that the jackpot increases each successive drawing, encouraging more people to buy tickets. Furthermore, many states and countries allow lottery players to choose their own numbers from a selection of predetermined options; this gives players greater creative control in selecting numbers with symbolic significance, like those found in fortune cookies or TV shows like Lost.
American jackpot winners typically have the option to select either annuity payments or lump sum payments as the payout method for their jackpot winnings. Annuity payments tend to pay approximately the present value of annual installments while lump sum payments offer smaller payments due to taxes due.
Odds of winning
Have you ever purchased a lottery ticket? You are likely aware of how stacked against you the odds can seem; yet somehow the jackpot still seems to grow each week due to lottery games being games of chance rather than skill.
Chances of winning a lottery prize may not be as low as you may believe, according to Casino Guru’s research. A person has 1 in 13,983,816 chance of taking home the jackpot if they purchase one ticket for each possible number combination in a six-number game – playing more frequently or purchasing additional tickets will not increase this statistic.
Over time, lottery jackpots have skyrocketed, thanks to Powerball and Mega Millions increasing odds for winning the top prize from 1 in 175.2 million to 1 in 292.2 million – an unprecedented change that has driven lottery jackpots ever-higher – but is this gambling worth taking?
Taxes on winnings
When winning the lottery, you have two payment options to consider when receiving your prize: either as one lump sum payment or via annual or monthly installments. Each option may have various financial repercussions and it is best advised that before making your choice you consult with a tax attorney or certified public accountant (CPA).
Lottery winnings are considered income and may put winners into higher tax brackets for that year. Should they win big jackpots, chances are high they’ll fall into the highest federal tax bracket of 37%; lotteries usually withhold 24% for federal taxes but you may owe additional tax when filing your return.
Many states and localities levy taxes on lottery winnings as well. New York, for instance, taxes can range as high as 13% of prize amount and you must itemize losses on tax form 1040 but cannot subtract them from income earned elsewhere. You can find additional information regarding New York lottery taxes at its website.
