LOTT TO LOSE: Lottery player scoops $1m after spending just $50 – but $360,000 vanished before taking home prize
According to The Sun, A lottery player has become a millionaire after winning $1 million through a scratch-off game, but a significant portion of his prize vanished before he could cash out.
The Winning Ticket
Corbblin Dixon purchased a $50 scratch-off ticket at a Publix supermarket in Orlando, Florida, and defied the odds of about one in 274,000 to win the second-place prize. However, when it came time to claim his winnings, Dixon faced a decision regarding how he wanted to receive his prize.
Choosing the Lump Sum
Dixon opted for the lump sum payment option, which meant he walked away with $640,000 after taxes. This decision cost him $360,000 upfront, as the federal government takes a 24% tax on lottery winnings exceeding $5,000.
Despite the hefty tax bite, Dixon was fortunate in one regard: Florida does not impose a state tax on lottery winnings, making it one of the few states that allow winners to keep more of their prize money. Other states like California and Texas share this benefit, along with New Hampshire, South Dakota, and Tennessee, where lottery winnings are also tax-free.
State Tax Rates Vary
Conversely, some states impose significant taxes on lottery winnings. In New York, for example, winners face a 10.9% state tax in addition to federal taxes, while residents of Maryland, New Jersey, and Oregon must pay rates of 8% or higher.
Also read: SNAP recipients: $292 Food Stamps sent through Oct. 28, how to claim them
The tax implications are a crucial factor for many winners when deciding between the lump sum or annuity payment options. The annuity, though less popular, provides winners with staggered payments over several years, allowing for more financial stability.
Risks of the Lump Sum
Financial expert Robert Pagliarini warns that choosing the lump sum can carry significant risks. “If you take the lump sum, you have to realize that if you start making mistakes or bad investments, there’s no do-over,” he explained. “It’s not like you are going to win the lottery again. You have one shot at this.”
In contrast, the annuity option offers winners greater flexibility to manage their finances over time. Lotto lawyer Andrew Stoltmann noted that around 90% of winners make the mistake of opting for the lump sum, often leading to financial troubles later.
