Lottery winner wins $2 million prize after taking a chance on a $20 scratch-off ticket – but takes home less than half after picking

A WOMAN won millions on a $20 lottery ticket but only took home a six-figure sum.

She hit the jackpot by playing a 100X The Cash scratch card.

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Odessa Chamblee of Ahoskie in Hertford County, North Carolina — located two hours northeast of Raleigh — purchased her ticket at the Village Store in Wallace, according to the North Carolina Education Lottery.

On July 30th, the lottery winner went to collect her money.

She chose to receive it as a lump sum of $1.2 million rather than an annuity of $100,000 over 20 years.

However, she only walked away with $858,006 due to required state and federal tax withholdings.

But the Chamblee area benefited from taxes withheld from lottery prizes.

Hertford County received $15 million in lottery funds to build the new Ahoskie Elementary School.

CHARGING TAXES

U.S. lottery winnings “are considered ordinary taxable income for federal and state tax purposes,” meaning the winnings are taxed in the same manner as wages and salaries, according to Tax Law.

With federal taxes, lottery winnings are taxed based on federal tax brackets, so winners will not pay the same tax rate on the total amount.

These tax brackets are “progressive,” meaning portions of earnings are “taxed at different rates,” according to the tax preparation software company.

State and local tax rates may change based on location.

Some states charge no income tax, while others withhold more than 15%.

North Carolina lottery winners face a 5.45% tax rate on their winnings, according to wise voter.

SINGLE VALUE AND ANNUITY

Lottery winners must choose whether they want to receive their prize all at once or through annual payments.

A lump sum is a one-time payment, while annuities are paid in increments that span years.

There are disadvantages and benefits to both options.

Those who opt for the one-time payment have more immediate control over their earnings, according to TaxAct.

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 needed 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 get the lump sum or take the annual fee.

According to the outlet, several financial advisors recommend taking the lump sum because winners “typically receive a better return by investing lottery winnings in higher-returning assets like stocks.”

However, those who choose to pay annuities can take advantage of their annual tax deductions “with the help of a lottery tax calculator and a lower tax bracket to reduce their tax bill.”

LOTTERY LOSSES

Many other lottery winners have lost a substantial portion of their winnings due to taxes.

A Massachusetts winner won a $1 million prize, which was reduced to $650,000.

One winner from Ohio received $199,000 but took home just $143,280.

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