Pennsylvania imposes 3.07% lottery tax on lottery winnings

The State of Pennsylvania introduced a state lottery for the first time in 1972, and cash winnings through it will be subject to state taxes. Since then there have been many things that have changed with time. However recently to help its financial sheets the State of Pennsylvania imposed a way to dig deep into the lottery winners pockets. As reported by The Times-Tribune that State of Pennsylvania will now be imposing a 3.07 percent state personal Income tax on lottery winnings over $5,000 before the winners can collect their prize money under the new state budget for fiscal 2016-17.

This has happened for the first time here in the State of Pennsylvania that winning lottery players are required to pay the state Income tax since the lottery game made its debut in 1972. However other lottery prizes such as gift cards, merchandise are exempted from the tax.

As per the reports, this new lottery tax is introduced to address the issues of Pennsylvania’s chronic fiscal problems and this new state tax revenue is a viable solution that that government can think of. This new lottery tax which covers lottery winnings since Jan 1, is expected to generate nearly $16 million in revenue for the state in this fiscal year.

Earlier Pennsylvania lottery winnings were not taxed and it has been this way since the gambling games came to state in the year 1971. But Pennsylvanians need to pay tax on money they win from other state’s lotteries. Pennsylvania is already facing a projected deficit of $1.5 billion to $ 2 billion and Democratic Governor Tom Wolf’s says that “the new lottery tax could bring in $15 million next year and $25 million by the 2019-2020 fiscal year.”

A spokesman for Gov.Tom Wolf also said “The commonwealth has a huge financial hole, and this (lottery winnings tax) was part of a much-needed larger revenue package,”

as quoted by a website. On July 13th the State of Pennsylvania has approved the $31.5 billion state budget. Apart from the lottery the State will also get its funding from the taxes collected from the expanded commercial wine sales, new taxes on tobacco users and consumer downloads of videos, music, and apps. The State will notify 46,000 lottery winners who won cash prizes of more than $600 during the first half of this year through mail. As per the new law, all the winners who cashed $600 and above are required to report their winnings to the Revenue Department and IRS.

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