Tell Me About The Taxes On The ‘For Life’ Prizes In Lucky for Life

A woman named Kris recently sent us a question on Facebook asking about how the taxes work in the Lucky for Life game for its top two prizes: $1,000 a day for life and $25,000 a year for life.

You likely already know that Lucky for Life is a $2 lotto game with drawings twice a week, on Mondays and Thursdays. The game’s top two prize levels are described as “lasting as long as you do,” meaning that they are truly for life. The minimum guaranteed payout for those two prize levels is 20 years, and there is a lump-sum option for players who want that rather than lifetime annuity payments.

If you were to win at either of the game’s top two prize levels here in Iowa and you chose to receive your prize in annuity payments for life, you would receive your winnings in annual payments. Federal and state withholding would apply to each payment. (The current federal withholding rate is 24 percent, while the state withholding rate is 5 percent.)

So, for the game’s top prize of $1,000 a day for life, you would receive an annual payment after withholding of $259,150. And for the game’s second prize of $25,000 a year for life, you would receive an annual payment of $17,750 per year after withholding.

Four Iowa Lottery players so far have won the game’s prize of $25,000 a year for life. We’re still waiting for our first top-prize winner in Lucky for Life!   

And don’t forget: There are eight other ways to win in Lucky for Life, so be sure to check your ticket after each drawing.

Comments

[Mary Neubauer]

Hi, George. I think you're referencing potential income tax questions, while what I addressed are the withholding taxes that are taken out when the prize is paid. While the withholding amounts are designed to account for the tax liability that someone would have for the prize, you are correct that a winner may owe more than or less than that amount, depending upon his or her individual circumstances outside of winning a lottery prize. In some instances the withholding may be too much, in others, it may not be enough. That's why we always suggest that our winners consult a lawyer or financial planner as quickly as possible to go over all of the details that may apply to them.

[George W Lowrey]

After all taxes are paid at the end of the year you will will have 204,900 left . Fed tax for 365,000 is 35% state income for 365,000 is 8.9% one of the highest in the country.

[Mary Neubauer]

Oh, that makes sense, Mark! I will pass along your comment. Thank you for sharing your insight.

[Mark Chandler]

Hi Mary! Sorry to have to put this here, but could you pass along a suggestion to whomever runs the poll on the main page?

It would be nice to be able to answer the poll with the answer "I don't like this game" or something similar when applicable- it will give you a better feel for the correct answers of your players. There has been more than once I have either had to give an incorrect answer, or not participate because none of the available answers fit!

Thanks,
Mark