How to Avoid State Lottery Taxes

For lottery players, the big dream is winning the jackpot. The big prize might buy a new house, a car or even a life of luxury. But many states’ lotteries come with a hidden cost: they may hurt poor people and minorities the most. Lottery proceeds are not only a form of “regressive taxation” that disproportionately burdens lower-income residents, they also create inequities by boosting college scholarships and wealthier schools far from the communities where lottery tickets are sold, the Howard Center reports.

But if we don’t want to pay for our own gambling addiction, we should be able to choose not to participate in state-sponsored games that promote an activity that has clear risks of addiction and ill health. That’s why it’s important to keep the door open for new ways to get around state-sponsored lotteries.

The first step is to stay away from scammers who try to trick lottery winners into paying up front fees before their winnings arrive. They might ask for money to cover processing costs or say that there’s a mistake and they need to send some of the cash back. Lottery officials warn that if you’re asked to pay a fee before you win, it’s a scam.