That rollover jackpot is getting huge again, which tends to get people thinking creatively about what happens if you buy a Powerball ticket in another state… i.e. typically, can you escape paying your own states higher tax rate!?
Before I get into this, let’s be really clear and get this out the way:-
1. Are You Allowed To Buy A Ticket In Another state?
There’s no rule against it. If you’re on vacation in another state, you can play in that state. If you live near a state border and can easily reach a store in the other state, you can play. Even people from overseas can buy tickets too!
So you do NOT have to be a state resident to be able to play in that state, or indeed any state.
2. Who Pays The Prize?
The next thing to realise if you buy a lottery ticket in another state, is that you cannot claim the prize in your state. You have to claim from the state where you bought the ticket.
Yes, this even applies to multi-state games like Powerball and Mega Millions. This is because each state has it’s own lottery company that runs all the games that you can play there.
So for small prizes you can still claim from a store as normal – but it will have to be a store in the state where the ticket came from. Your local store will not be able to pay it. For larger prizes you will have to send in a claim form to the lottery company for that state where you bought the ticket.
3. What About The Tax Then?
Some people think they can beat the tax system by crossing state lines to buy their tickets.
“My state has higher tax than the neighboring state, so I’ll be cunning and get my ticket there. Then when I hit that massive Powerball jackpot I’ll save millions in tax…”
Wrong!
This kind of cunning lottery system to beat the tax man will not work anyway. And of course tax evasion will get you a jail sentence.
For a jackpot the lottery company will deduct the tax before you even get the prize anyway. So the federal and state taxes for the state where the ticket was bought will already have been paid before the money hits your bank account.
However, your state will want their state taxes too!
So you have to pay double tax?
Well no, typically not. Because you will have already paid a chunk of state tax to the ‘other state’, your state will take this into account. So you only have to pay the ‘difference’. That is, the extra that you thought you were saving by playing in the neighbor state!
Then there are the smaller wins of course – taxes are due on these too of course, but not deducted in advance. You should be entering these as “other income” on your IRS returns anyway, but what if they are wins from another state? And can you deduct the cost of what you spent on tickets from those winnings?
This rapidly becomes a very confusing area as we’re talking about 47 different jurisdictions each with their own unique tax laws. Bottom line – get a tax expert to do your returns for you!
So Is It Worth Buying A Lottery Ticket In Another State?
Well not if you think it’s a cunning system to beat the tax – because it isn’t :-).
If it’s convenient though because you’re travelling, on vacation, there for work, or you would miss out on getting your ticket otherwise, then sure, why not.
If however you want to avoid any greater tax complications, then you might want to just stick to buying in-state. Your lottery company would prefer it that way too.
By VB October 18, 2018 - 2:56 am
Didn’t answer the query, post sucks.
By Dean October 25, 2018 - 12:31 am
Asked for clarification from VB of what it didn’t actually answer but got no reply, so apparently someone didn’t actually read the post…
Oh well, comment sucks 🙂
By KTorch July 7, 2019 - 12:26 pm
Someone will help you with it.
By Dean July 7, 2019 - 11:56 pm
Already tried – they didn’t reply to my email. So no idea what query VB had about buying tickets from another state that we haven’t already covered.
By KC July 29, 2022 - 6:59 pm
Can I buy a PA lottery ticket online on the PA lottery site when I’m out of state on vacation?
By Becky September 29, 2019 - 6:07 pm
This post was very helpful and answered even a couple questions I didn’t think to ask about buying out of state.
Thanks.
By Eric October 26, 2018 - 12:24 pm
I won $10 from the Mega Millions in Georgia but live in Iowa. Is there a way to claim this prize? How would I do that?
By Dean October 26, 2018 - 8:31 pm
You can only claim in the state the ticket was bought (because even though it’s the same game, they are different lottery companies).
By Allen Junior November 3, 2019 - 1:31 pm
You have to mail it to the lottery commission in that state… They will send you a check.
By Subhani November 13, 2018 - 1:53 pm
Can I play lottery from India.
By Dean November 14, 2018 - 12:41 am
Sure – there are lots of sites online that will buy tickets on your behalf for games all over the world.
By Mridul February 10, 2020 - 6:37 pm
I can help you with that if you are interested.
By Megan March 2, 2019 - 9:39 am
If I already play PB twice a week with friends in a pool, I wonder if it might be worth it to buy a subscription ticket in another state simply to throw anyone off the scent. We already live in a state in which we can collect anonymously, but I feel people would suspect if after a PB win in our state we all retired. It’s too bad we can’t benefit by picking a state that also collects no state tax (like Delaware for example).
By Thomas May 20, 2019 - 6:38 pm
No more Mega or Powerball for me, only stick to fantasy 5 or any game that is in my state. No muti-state game. Y’all are starting to suck real ball. If money goes in same pot from muti-state, you should be able to collect from any state that play that game. Period.
By Kdshields January 24, 2020 - 1:38 am
I prefer to play the games that my state offers. I prefer my state reaps the small amount of benefits.
By Ellie Davis June 14, 2019 - 3:29 pm
I was not aware that if you buy a lottery ticket in another state, you will have to claim the prize there. I like to buy lottery tickets from time to time, and this includes when I’m traveling. I will take your advice into consideration if I win anything with a ticket from another state.
By Kdshields January 24, 2020 - 1:40 am
As if you wouldn’t travel back for millions?
By Sheila Rene McCullough June 18, 2019 - 3:24 pm
Where online can I buy a lottery ticket in another state?
By Amari November 28, 2019 - 5:00 pm
What if you win the lottery, live in a state that allows you to remain anonymous but you bought the ticket in a state that does not allow you to remain anonymous? Can you remain anonymous?
By Dean November 28, 2019 - 8:48 pm
You have to claim in the state where you bought the ticket, so those are the rules that would apply.
By Reginald Richardson May 15, 2020 - 2:12 am
Why doesn’t New Jersey have All OR Nothing? And if I live in New Jersey can l play All OR Nothing online and if so how?
By JT May 16, 2020 - 2:36 pm
What if you buy it in an income tax free State like FL, TN or TX, then move there before claiming the prize? Will your old State try and claim their unfair share?
Another strategy would be to set up a non-profit org before claiming the prize – don’t sign the winning ticket with your name – then donate them to this non-profit, which you run.
Any problems with that?
By Dean May 18, 2020 - 4:15 am
I suspect your residency at the time you won the prize will determine who is due tax.
As for the non-profit, no idea, but sounds pretty sketchy. You could just pay the tax 🙂
By RC May 31, 2020 - 11:49 pm
Does this mean if I buy a lottery ticket in a state where you can anonymously claim your prize but live in a state with a higher tax I’d pay the higher tax but still get to be anonymous?
By Beverly June 12, 2020 - 9:14 pm
I would like to purchase lottery as a Father’s Day gift for my brothers, and friends who all live in multiple states. If they should win, is there any type of affidavit I could get and sign that states it’s a gift, that I am not responsible for any taxes or fees etc… as the purchaser?
By Dean June 14, 2020 - 2:36 am
I’m not a lawyer or accountant so you might want to ask one of those. But I don’t see a problem – you’re gifting the tickets not the prize money. So it’s their ticket if they win, not yours 🙂
By John Lockheed August 25, 2020 - 4:20 pm
Ahhh. No. Never recommend anyone declare lottery tickets as income. Government screws enough people and the IRS is the biggest offender. Don’t declare scratch off winnings unless you’re forced to.
By Laurie Allison January 17, 2021 - 12:12 am
What if you are a Michigan resident and you buy a scratch off ticket in New Hampshire that wins $5,000 and the NH lottery did not take any Fed taxes. They have no state tax on winnings. They never provided a tax reporting form. How will that affect our taxes in Michigan and Federal taxes?
By Moni October 31, 2022 - 2:12 am
So, the example was the residential state having a higher tax rate than the state the ticket was purchased in and the answer was that the residential state wants the difference between the 2 states taxes…. BUT
What if the state I purchased the winning ticket in had the higher tax rate and took MORE than my state would have if the ticket had been purchased in my home state? Will my state credit me the difference, pay me back the difference or just take nothing??