Lump Sum vs Annuity Lottery Payments - Gambling Loss Deductions
Another difference between lumpsum/annuity lottery payments worth mentioning here is the deductions for gambling losses - Gambling losses, including any wagers, credit card expenses, losing tickets, betting, and so on - that can be counted as itemized deductions from the lottery winning taxes.
As these deductions are made in the year that the losses have occurred, it is another advantage to the annuity option as future losses can be deducted in the years when the proceeds are arriving.
On the other hand, when receiving a lump sum, which is then taxed all in that year, only gambling losses of that year can be deducted of the lottery winning taxes.
However, these losses can't exceed the lottery winning gains, which are larger with a lump sum than smaller annual payouts.
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