In Florida, winnings in the lottery and other cash prizes are subject to taxation. The tax is calculated at the federal rate and the Florida state income tax rate. The federal tax rate is 24%, and the Florida state income tax rate is up to 5.5% (Tax Foundation, 2023). Payors must withhold tax from lottery winnings for each winner and provide them with an income tax return at the end of the year. Winners may submit their tax returns and pay taxes online. They may also be exempt from paying tax on winnings if it does not exceed $600 (Tax Foundation, 2023). Hence, Florida has no personal income tax, and each state’s tax code is considered a multifaceted system with many different variable parts.
Lottery winnings tax is a state income and is used to cover the expenses for social services and other state needs. The lottery winnings tax is applied differently for residents and non-residents. For Florida residents, the lottery winnings tax is 3% of the total winnings (Tax Foundation, 2023). Such an indication means that any winnings over $5,000 will be taxed at 3%. The tax is taken immediately after the winnings are exchanged for money. The tax must be paid by December 31st of the current year (Elaws.US, 2023). The lottery winnings tax in Florida is in effect and is applied to both residents and non-residents. However, the tax rate for them is different.
In most cases, the state allows lottery winnings from its own state lottery to be excluded from state income tax to encourage people to buy tickets and support the state. Such a system provides more funds for the state because if people know that they can win a big sum of money without paying income tax, they will be more inclined to buy tickets. Such an approach gives the state more funds to finance its projects.
References
Elaws.US. (2023). 12C-1.034. Special rules relating to estimated tax, 12C-1. Corporate Income Tax, 12C. Corporate, Estate and Intangible Tax, 12. Department of Revenue, Florida Administrative Code. State of Florida. Web.
Tax Foundation. (2023). Florida tax rates & Rankings. Tax Foundation. Web.
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