Dear Complainers: The Truth About Michigan’s Lottery Taxes

Dear Genesee County, Michigan... and anywhere else in the state:

Here's a reality check on the perceived high lottery taxes by the State of Michigan and the IRS.

See Also: Will the Grand Blanc, MI Lottery Winner Be Able to Remain Anonymous Under Michigan Law?

Seeing social media comments about the Grand Blanc Township $842M winning Powerball ticket made us wonder a couple things:

• Why do people get so angry when people in a community daydream about how they'd spend the money? We've all wondered at some point.
• Why do people think the government is illegally taking their winnings with taxes?

How much is Michigan's lottery tax?

The State of Michigan's lottery tax, while not 0%, is quite reasonable compared to most states.

It's important to note, the IRS takes 24% off the top, in every state. (Maybe more if you try to avoid paying them.)

Here's the state-by-state ranker from highest to lowest.

• New York 8.82%
• Maryland 8.75%
• New Jersey, Oregon 8%
• Wisconsin 7.65%
• Minnesota 7.25%
• Arkansas, South Carolina 7%
• Connecticut 6.99%
• Idaho 6.92%
• Montana 6.9%
• West Vergina 6.5%
• Arizona, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Nebraska 5%
• Illinois 4.95%
• Michigan 4.25%
• Ohio, Colorado, Missouri, Oklahoma, Virginia 4%
• Indiana 3.23%
• Pennsylvania 3.07%
• North Dakota 2.9%

15 states do not tax lottery winnings.

Alabama, Alaska, California, Delaware, Florida, Hawaii, Mississippi, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Utah, Washington (state) and Wyoming.

In reality, Michigan is nowhere near "the worst" when it comes to taxing winnings.

"But it's my money."

Technically, no, it wasn't and isn't all "your money." Lottery money is like a giant raffle.

The contest rules are public. Every player contributes hoping to win half (or whatever portion) remains after taxes. Meaning, you know the state and IRS will tax the winning jackpot.

"Well, it's terrible they take all of the winner's money."

Are "they" though? Again, if you know what you're getting into, the taxes are not secret. The winner is still getting a gigantic amount of money they likely didn't have before.

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In this case, the $842 million Powerball prize, the lump sum option is $425 million. After taxes around $300 million.

Let's keep a few things in mind:

• They didn't have to do any manual labor for it.
• They didn't even have to sell their limbs or soul for it.
• Nobody makes them participate.
• They chose to play the game.

One more possible tax

When someone hits the lottery, they might have to deal with an estate tax, proactively. Or else, you could be gifting a problem to your friends & family.

That is, if you can even bear to think about sharing your humble winnings, after taxes, with friends or family. (That was sarcasm.)

Congratulations on your newfound fortune. Now, you have rich people problems. (That was sincere and meant with loving reality.)

Seriously, though... winners can do things to protect themselves. See below for tips.