‘Does that really say a million?’ Lottery winner cries after winning $1 million prize – but they lost almost half of it in an instant

A Kentucky man got lucky after winning a $1 million lottery prize.

His winnings, however, were cut by nearly half because of the state’s lottery rules.

A resident of Frankfort, located in Kentucky’s Inland Bluegrass region, is preparing to retire after securing a $1 million windfall in a Kentucky Lottery scratch ticket.

Preferring to remain anonymous, he purchased the $30 Mega Millionaire Scratch-off ticket on April 28 at the Kroger on US 127 Hwy South in Frankfort.

Instead of crossing off the ticket immediately, he chose to scan the barcode, which displayed the message “see KLC Corp.”

This raised his anticipation and he commented, “Well, this is going to be really good.”

When he scratched the ticket, he discovered that he had actually won the game’s top prize of US$1 million, represented by the number three.

Initially feeling like he was dreaming, he shared the news with his daughter, who was equally surprised.

“I looked at him and said, ‘That really says a million,’” his daughter said.

The next day, he visited lottery headquarters, opting for a one-time cash payment of $871,000, which totaled $627,120 after taxes.

Expressing gratitude for his newfound financial security, he said, “I was planning to retire, but I didn’t have the financial means to do so, and now I do.”

He plans to use the earnings to pay off his mortgage and pursue more enjoyable activities, such as golf.

For selling the winning ticket, Kroger will receive $8,710.

TAXES

The IRS classifies net lottery winnings as regular taxable income.

As a result, federal income tax is assessed on the remaining amount after deducting the cost of the ticket.

Your exact tax liability depends on your tax bracket, which is established by your income and additional sources of income.

Because of this, the IRS usually withholds 25% and you are responsible for the remaining amount when you file your taxes in April.

However, there is a bright spot for individuals with the highest tax rate. There is a progressive federal income tax rate.

Lottery winnings: lump sum or annual fee?

Players who win big on lottery tickets typically have a choice to make: lump sum or annual fee?

Both payment methods can affect how much money you receive from your prize.

Annuities are paid slowly in increments, usually over 30 years.

Lump sums are paid all at once, but in smaller amounts since taxes are withheld all at once. This means 24% of your prize goes to Uncle Sam immediately. Many states also tax earnings.

Annuities can give winners time to create the financial infrastructure necessary to receive a life-changing amount of money, but lump sums have the advantage of being taxed only once.

It’s also worth considering inflation when making a choice, as payments don’t adjust to the value of a dollar. This means you will likely receive less valuable money at the end of an annuity.

Each state and game pays prizes differently, so it’s best to check with your state’s lottery to confirm payment policies. A financial advisor can also help you weigh the pros and cons of each option.

Experts have differing opinions on the possibility of take the fixed amount or take the annual fee.

For example, according to Yahoo FinanceYour tax rate as a single filer in 2022 will be as follows, after deducting certain amounts:

• 10% on the first $10,275 you earn
• 12% on the next $31,500
• 22% on the next $47,300
• 24% on the next $80,975
• 32% on the next $45,900
• 35% on the next $323,950
• 37% on anything over $539,900

It’s crucial to remember that certain states will deduct a percentage of your lottery winnings from your taxes, with the exact amount varying depending on where you live.

Income tax rates in states that have them vary between 2.9% and 8.82%.

Notably, nine states – including the following – charge no state income tax:

In general, the state where the ticket was purchased (and where the prize is awarded) will withhold taxes at the appropriate rate if you reside in one state but purchase it in another.

Calculations may be necessary to determine the exact amount owed to your state during tax season, since you will be credited for any amount that has already been withheld and the states will balance the taxes that have been allocated among themselves.

Regarding Kentucky, the law stipulates that lottery winnings must be paid at the state’s income tax rate, in accordance with Kentucky.com.

This rate was reduced from 5% to 4.5% at the beginning of 2023, and can be further reduced by 0.5% as long as specific requirements are met and the legislator approves the reduction.

You’re still subject to state income tax on lottery winnings even if you don’t live in Kentucky but buy your winning ticket there.

Meanwhile, lottery officials are asking participants to check their tickets as a $50,000 prize remains unclaimed.

And the winner of the March 15, 2024 draw has until September 11, 2024 to claim their winnings.

Remember to gamble responsibly
A responsible player is someone who:

• Set time and monetary limits before playing
• Only games with money they can lose
• Never chase your losses
• Don’t play if you are upset, irritated or depressed

If you or someone you know is struggling with gambling addiction, call the National Gambling Helpline at 1-800-522-4700 or visit the National Council on Problem Gambling online.