Every online player wonders how much tax they will pay when they win their scratch card. If you win a jackpot prize on your scratch card or a lottery ticket, your chances of paying taxes will be high. However, you don’t have to worry about tax when you win a modest amount with your scratch ticket.
Read this guide to learn about whether your scratch card winnings are tax-free.
Paying Tax on Big Scratch Card Wins
When you win a large jackpot on scratch cards, you must remember that you must pay tax. Luckily, jackpot prizes are large, so you won’t feel like the Internal Revenue Service (IRS) has taken all your money. The IRS imposes a 25% surcharge on all prize winnings.
However, some states will impose an additional tax on your winnings based on your income. So, you need to consider all the taxes you must pay.
Paying Tax on Small Scratch Card Wins
Scratch card jackpots don’t get as large as they do with state lotteries. So, you don’t have to worry too much about taxes on this gambling game. For example, it’s typical for players to win $20 on a $2 scratch ticket. The government will not impose a surcharge on this type of win because it’s small.
However, if you’ve won a large sum from scratch cards, the government will treat your winnings as income. That means you will incur some surcharge on those winnings. The IRS requires you to report any winnings from these games, even if the amount is insignificant.
Scratch Card Tax Based on State Laws
Typically, lottery and scratch card winnings will be treated as income and incur tax on state and federal levels. Federal taxes will be the same for everyone in the USA. However, depending on your state, you might have to pay taxes.
If you live in Delaware, California, or Pennsylvania, you’re lucky because these states don’t impose surcharge on lottery winnings. But your winnings will incur a surcharge if you live in Arizona or Maryland. So, you need to check what the surcharge laws are in the state that you’re living in.
Redeeming Your Scratch Card Winning and Paying Tax
There are several ways that you can use to redeem your winnings. The state you reside in will determine how you claim your winnings and pay taxes. For small winnings, the retailer you bought your ticket from will give you your winnings. However, if you’ve played using a casino site, your winnings will be credited to your account.
But if you’ve won a large amount, then the retailer or casino might require you to come to collect a check in person. However, you can request to remain anonymous. Then you have to disclose your winnings to the IRS and pay the required tax.