WHAT’S NEW check to: PA Department of Revenue, PO Box Act 84 of 2016 applies the commonwealth’s 3.07 280403, Harrisburg, PA 17128-0403. percent personal income tax to cash prizes paid by the Pennsylvania Lottery on or after Jan. 1, 2016. WILL THE PENNSYLVANIA LOTTERY SEND I WON A NONCASH PRIZE FROM THE ME A REPORT OF MY WINNINGS? PENNSYLVANIA LOTTERY. DOES THIS Winners of an individual prize valued at greater CHANGE IN THE LAW AFFECT ME? than $600 will receive a federal Form W2-G, The change in the law only imposes a tax on cash Certain Gambling Winnings, by mail. Winners (monetary) prizes. Noncash prizes, such as with questions about their individual tax liability merchandise or gift cards, are not subject to PA should consult a qualified tax professional prior to personal income tax. filing their tax return.

If you chose to take the noncash option, any WHERE SHOULD I REPORT TAXABLE federal tax withholding payments, state sales tax, PENNSYLVANIA LOTTERY WINNINGS ON fees or other payments made by the Pennsylvania MY PA TAX RETURN? Lottery on the value of a noncash prize are You should report your PA-taxable winnings on PA considered taxable income. Schedule T and on Line 8 “Gambling and Lottery Winnings” of your PA-40 Personal Income Tax WHAT IF I WON THE PENNSYLVANIA Return. Spouses must report their winnings LOTTERY PRIOR TO 2016 AND I’M separately. CURRENTLY RECEIVING ANNUITY PAYMENTS? AM I ALLOWED TO REDUCE MY TAXABLE If you won a lottery prize prior to 2016, but you PENNSYLVANIA LOTTERY WINNINGS BY chose to receive the prize in annuity payments THE AMOUNT I SPENT ON LOTTERY rather than in a lump sum, any payments you TICKETS? receive in tax years 2016 and after are subject to Losses from Pennsylvania Lottery tickets the PA personal income tax. purchased on or after Jan. 1, 2016 may now be used to offset gambling and lottery winnings. DOES THE LAW APPLY TO BOTH Therefore, you may use gambling losses (cost of RESIDENTS AND NONRESIDENTS? lottery tickets or wagers), not exceeding your Yes. Both residents and nonresidents are subject total winnings, to offset gambling winnings from to PA personal income tax on Pennsylvania Lottery the same tax year. cash prize winnings. AM I REQUIRED TO SUBSTANTIATE MY ARE LOTTERY WINNINGS FROM OTHER GAMBLING LOSSES USED TO OFFSET STATES TAXABLE FOR PA PERSONAL WINNINGS? INCOME TAX PURPOSES? Yes. You must be able to substantiate gambling Yes. All gambling and lottery winnings from an losses used to offset winnings reported on the PA out-of-state lottery or other sources are taxable to personal income tax return. Evidence of losses Pennsylvania residents for PA personal income tax may take several forms, including providing copies purposes regardless of when the payments are of losing tickets, a daily log or journal of wins and received. losses, canceled checks, notes, etc.

WILL THE PENNSYLVANIA LOTTERY WHAT IF I CHOOSE TO DONATE, SPLIT, OR WITHHOLD INCOME TAX ON THE TAXABLE ASSIGN THE PROCEEDS OF MY LOTTERY WINNINGS? WINNINGS? Yes. The Pennsylvania Lottery will automatically The Pennsylvania Lottery permits donating, withhold PA personal income tax on prizes greater splitting, and assigning lottery proceeds. If you than $5,000 paid after July 12, 2016. choose to donate, split, or assign your lottery winnings, in whole or in part, the winnings are IF THE PENNSYLVANIA LOTTERY DID NOT taxable to each recipient. WITHHOLD INCOME TAX, WILL I BE REQUIRED TO MAKE ESTIMATED PA income tax withholding is based on the total PAYMENTS? amount of the prize won. For example, if two Winners who received monetary prizes between people win a lottery prize of $10,000 and split the Jan. 1 and July 12, 2016 may be required to proceeds equally, $5,000 of income is taxable to make estimated tax payments to the PA each person and is subject to the 3.07% Department of Revenue to avoid the estimated withholding rate. underpayment penalty. WHAT IF I SELL MY ANNUITY PAYMENT TO Payments can be made easily and securely A THIRD PARTY? through Personal Income Tax e-Services or by If you sell your annuity, you are no longer liable completing form PA-40ESR (I) and mailing a for tax on the future payments; but you are liable for tax on the payment you receive through from the sale. The gain from the sale is reported on PA Property” of your PA-40 Personal Income Tax Schedule D and on Line 5 “Net Income or Loss Return. from the Sale, Exchange or Disposition of