Tax Implications and Other Considerations of Winning a Lottery

Jack R. Fay, PhD, CPA, and Stephanie M. Hyder, and Melvin L. Roush, PhD, CPA

Currently, 43 states and the District of Columbia sponsor or participate in state or regional lotteries. Lotteries have a long history in the United States. As early as 1612, the Virginia Company used lotteries to raise funds for the settlement of Jamestown. In 1621, these lotteries generated nearly half of the Virginia Company's annual income. Early lotteries raised funds that assisted with the construction of toll roads, bridges, universities, schools, and churches. Lotteries helped build Harvard, Dartmouth, Yale, Brown, and other institutions of higher learning (Encyclopedia Britannica, 2005). The first “modern” lottery began in New Hampshire in 1964, and its proceeds supported education (Georgia Lottery Corporation).