Lottery winner scoops $2m prize after taking chance on $20 scratch-off – but takes home less than half following choice

A WOMAN has won millions on a $20 lottery ticket but only took a home six-figure sum.

She hit the jackpot by playing a 100X The Cash scratch-off.

NC LOTTERY

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Odessa Chamblee of Ahoskie in Hertford County, North Carolina – located two hours northeast of Raleigh – purchased the ticket from the Village Store in Wallace, per the North Carolina Education Lottery .

On July 30, the lottery winner went to collect her money .

She chose to receive it as a lump sum of $1.2 million rather than an annuity of $100,000 over 20 years.

However, she only left with $858,006 due to required state and federal tax withholdings .

But Chamblee’s area has benefitted from taxes withheld on lottery prizes.

Hertford County was granted $15 million from lottery-raised funds to build the new Ahoskie Elementary School .

TAKING TAXES

US lottery earnings “are considered ordinary taxable income for both federal and state tax purposes,” meaning the winnings are taxed in the same manner as wages and salaries, according to TaxAct .

With federal taxes, lottery winnings are taxed based on federal tax brackets, so winners will not pay the same tax rate on the whole amount.

These tax brackets are “progressive,” which means parts of the winnings are “taxed at different rates,” per the tax preparation software company.

State and local tax rates can change based on location.

Some states don’t charge an income tax, while others withhold more than 15%.

North Carolina lottery winners face a 5.45% tax rate on their earnings, according to Wisevoter .

LUMP SUM AND ANNUITY

Lottery winners must choose if they would like to receive their prize as a lump sum or via annuity payments.

A lump sum is a one-time payment, while annuities pay in increments spanning over years.

There are drawbacks and benefits to both options.

Those who choose a lump sum have more immediate control over their earnings, per TaxAct.

Lottery winnings: lump sum or annuity?

Players who win big on lottery tickets typically have a choice to make: lump sum or annuity?

The two payout methods can impact how much money you get from your prize.

Annuities pay out slowly in increments, often over 30 years.

Lump sums pay all at once but in a smaller amount, as taxes are withheld in one go. That means 24% of your prize goes to Uncle Sam right away. Many states tax winnings as well.

Annuities can provide winners time to set up the financial infrastructure required to take in a life-changing amount of money, but lump sums have the benefit of being taxed only once.

Inflation is also worth considering when making a choice, as payouts do not adjust with the value of a dollar. That means that you’ll likely be getting less valuable money towards the end of an annuity.

Each state and game pays out prizes differently, so it’s best to check with your state’s lottery to confirm payment policies. A financial advisor can also help you weigh the pros and cons of each option.

Experts have varying opinions on whether to take the lump sum or take the annuity .

Per the outlet, multiple financial advisors recommend taking the lump sum because winners “typically receive a better return on investing lottery winnings in higher-return assets, like stocks.”

However, those who choose annuity payments can take advantage of their annual tax deductions “with the help of a lottery tax calculator and a lower tax bracket to reduce their tax bill.”

LOTTERY LOSSES

Many other lottery winners have lost a substantial amount of their earnings to taxes.

A Massachusetts winner earned a $1 million prize that was reduced to $650,000 .

An Ohio winner received  $199,000, but only took home $143,280 .

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