The question that has never been answered, at least not completely. Whenever somebody brings this up, lottery experts tend to turn a blind eye. This kind of behavior must be penalized in some way. If the topic doesn’t fit one’s wishes, it still needs to be addressed. Be advised, local laws apply as well. The laws of one state differ to another. However, lottery operators are adamant about this question. They try not to discriminate against any player group.
I know you really want to find out, learn if you as a US citizen who’s out of the USA can play any US lottery US citizen who’s out of the USA can play any US lottery.
First and Foremost – Can Non-US Players Play US Lotteries?
Well, there’s a different group of players who wants to learn the opposite. You see, lottery operators want to have more lottery players, as many as possible. This makes the lottery more attractive, because the jackpots increase faster, reaching rather alluring amounts.
Because of this, Non-US players, regardless of their location, can buy lottery tickets for any US lotteries, and actually win the advertised prizes. The payout is arranged with the lottery winner, and the prize is cashed out as agreed. Nevertheless, this is not the subject of this article. This time around, I’m going to be a bit more specific. It concerns US citizens who are currently abroad, regardless what the reason is. It can be a vacation, the player might’ve moved because of work, etc. In other words, the length of the stay is relevant, but only if it’s a long one.
US Citizens Abroad Can Play US Lotteries, HOWEVER
However, there’s a twist. Say you win the jackpot. Now, because you are staying in a foreign country, your host expects a share of the pie as well. It doesn’t matter if somebody has been buying lottery tickets on your behalf, or you’ve bought them online, you will be awarded the prize in full. Upon your arrival in the US, or upon the bank transfer, you will become the rightful owner, the rightful winner of millions dollars.
Your location is of great importance, both to you, to the lottery operator and to any tax authorities that might be eyeballing you, waiting to see if you’re going to pay your taxes.
And you thought going for a vacation and playing the lottery was a good idea? Believe me, it still is a good idea. Nonetheless, it will cost you a bit extra. That is, if it was a longer than usual stay.
Double Taxation Might Be Somewhat of a Problem
Double taxation is the biggest problems US players face if they win the lottery while being abroad, legally. What is double taxation one might ask. Well, as the name suggests, you are being taxed twice. Any income, any winnings, any cash injection needs to be taxed, twice. Both the IRS and the local tax authority want a share of your winnings. Let’s say that the US taxes total 35%, and the country where you’re residing wants 10%. You will be charged 45% of the total jackpot amount.
Say you’ve won $1,000,000. Say goodbye to $450,000, in taxes. IN TAXES! Furthermore, additional issues can arise, just because of taxes. Note, the operator wants to pay you the prize if you’re the winner. Otherwise, they discredit themselves, their integrity goes down the drain, and they will never entertain another lottery player, ever!
Tax Treaties are a Life Saver
If the USA has a tax treaty with the country where you’re located, then I have good news for you. You’re not going to have to pay double taxes. It works like this. For example, say the US tax on lottery winnings is 30%, whereas the tax where you currently are is 15%. You pay the 15% in the country where you win the lottery, and you pay the remaining 15% back in the USA.
The IRS, the USA’s tax authority is well connected, but there still are a lot of countries with which it hasn’t established any tax treaties, and I can’t blame them. Tax treaties can reduce the taxes dramatically. For some businesses, tax treaties are the basis on which they decide if they’re going to expand in a given market. You can check the full list of countries online with which the USA has a tax treaty established.
I can already imagine how you win the lottery abroad, and you’re twice as happy, just because you know you won’t be double-taxed.
Certain Restrictions Apply to US Players Who Are Abroad
Slowly, but surely, we’re rounding up the tax matters that can affect you as a lottery winner and as a lottery player in general. However, I’m not done yet. I said the US is well connected, and in good relations with a lot of jurisdictions, but it’s no secret that the US has imposed restrictions on a decent number of countries as well.
So what happens if you’re in one of these countries?
Sadly, you’re in a lot of trouble. It’s best not to go public. I know this is a gray area, but this is what I’d do. I’d leave the country, go back to the USA, and claim the prize afterwards. This way, I get to pay one tax only, and I’ll avoid loads of legal work and legal fees.
The thing is, if you’re in of these countries, the operator might be stopped from paying out the prize, to a bank account located in the “restricted territory”.
Anyone Who Presents a Winning Ticket Will Be Taxed and Awarded the Prize
Enough with the complexities! I get tired of tax matters, regardless if they’re mine or somebody else’s. I know I have to pay my taxes, and I do, I just think it’s too much. No wonder they say, “accountants are the magicians of the modern age”.
Nevertheless, almost all lottery operators, including the Powerball and Mega Millions amongst others, will pay out the prize to the person who shows a winning lottery ticket. They’ve already put it on their income statement as an expense. Basically, they don’t have anything to lose.
Undeniably, lottery winners have found a lot of ways to bypass these legislations. Usually, they find a trustworthy person who claims the lottery prize on their behalf, for a small fee of course. This is, legal, but unethical, in my honest opinion.