Taxes & Lottery Payments
While we do not give tax advice, we think you should be aware of the following to discuss with your own tax advisor.
Income tax when you sell
When you won your lottery prize, you know that every payment has a certain amount of federal and possibly state and municipal taxes deducted by the Lottery. That is because your lottery prize and your lottery prize payments are taxable.
When you sell any of your lottery prize payments, the sale price is also taxable.
That doesn’t mean that you will have to pay all the tax in cash. You may have tax losses that you can deduct from your taxes due. Or you may have already paid all your taxes for a specific tax year and so you won’t need to pay any more taxes.
However, taxes are an important consideration when you sell your lottery prize payments, and you should consult with your tax advisor to understand what your tax obligation will be.
Tax liens and other liens
When you sell your lottery prize payments, we, and every other buyer, will check your credit records to see if you owe any money for federal or state taxes, or for child support, or for any other debt that may affect your right to your lottery prize payments.
There are some debts that do not impact your lottery prize payments, and we will be able to tell you which ones do and which ones don’t.
If there is a tax lien filed against you or if you are in arrears of your child support obligations, then at closing, when you get the lump sum of cash for your lottery prize payments, the buyer will have to pay off the money you owe. This is not something that can be avoided, because the buyer wants to know that the payments you have sold are free and clear of any liens or claims.
Therefore, you must be aware that when you sell any lottery prize payments, any tax liens and any child support arrears will be deducted by us from the purchase price to you, and you should consult with your financial advisor to make sure you know your obligations when you are planning what to do with your lump sum.