Everyone dreams of winning the lottery. And with the U.S. dollar as strong as it is, winning a lottery in the U.S. just became that much better, as one man from Iraq just found out when he won the US$6.4 million Oregon Megabucks jackpot.
This is the first time in the lottery’s history that a person living outside the U.S. has won the lottery. Under U.S. law though, depending on where you live, non-U.S. residents who win a lottery are subject to a 30% withholding tax.
U.S. Lotteries Go Global
M.M., a player from Iraq, (who wishes to remain anonymous for safety reasons) recently won $6.4 million playing the Oregon Mega Bucks lottery.1 That amount is the equivalent of $8.8 million Canada dollars and 7.8 billion Iraqi dinar (IQD). In Iraq, the average annual income is about US$4,000 or 4.4 million dinar.2
The winning draw occurred on August 24, 2015. While this is the first time a person living overseas won, there are no restrictions on foreigners winning prizes or buying tickets through an online agent.
The lottery winner, who purchased his Megabucks ticket through an online broker, was invited to Oregon to collect his $6.4 million winnings. Instead of taking a lump sum payment, M.M decided to go with a yearly payout of $256,000 before taxes every year for the next 25 years.
M.M. has already received the first of the 25 annual payments (which, after taxes had been deducted came to around $158,000). He said he intends to give the money to his two sons.3
Mega Millions Jackpot Grows to $85 Million
In Canada, if you win the lottery your winnings are not taxed because it is a result of chance. You can’t tax good luck or chance, only income. If you win $1.0 million playing the lottery in Ontario, you get to keep the whole $1.0 million.
This isn’t the case in the United States. Substantial lottery winnings are subject to a 30% withholding tax. For the most part, substantial refers to anything over $1,200. If you win $1.0 million playing the lottery in the United States, you walk away with just $700,000. The IRS keeps $300,000.
Or, if you live outside the U.S and win this month’s $85 million Mega Millions Jackpot, which is played in 44 states, plus the District of Columbia, and the U.S. Virgin Islands, the IRS will withhold 30%, or $25.5 million.4
If you do visit the United States and pick up a lottery ticket (many can only be purchased in the U.S. or, in the case of M.M, through an online broker), keep in mind non-Canadian lottery numbers are not published or announced on Canadian TV or newspapers. You need to be proactive and look up the winning numbers online. Also, if you do have a winning lottery ticket and fail to collect your winnings in the allotted time period, you lose the money—all of it.
U.S. Lottery Winnings Subject to 30% Withholding Tax
If you are a non-U.S. resident and win a substantial amount of money playing a lottery south of the border (or at a casino, gaming tournaments, dog/horse wagering, keno, or a game show), your winnings could be subject to a 30% withholding tax. But, if you live in a country like Canada, which has signed a U.S. tax treaty, you may be eligible for a refund.
Some of the countries that do not have a U.S. tax treaty, but may still be eligible for a refund include: Australia, Bahrain, Barbados, Brazil, China, India, Indonesia, Israel, Kuwait, Mexico, Malaysia, Monaco, New Zealand, Norway, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, and the U.A.E. However, based on a recent court case, winners from these countries may qualify for a refund if they meet certain criteria. If you win a substantial amount gambling (typically over $1,200), your winnings are subject to a 30% withholding tax by the IRS.
RMS is the Easiest, Fastest Way to Get Your Money Back
If you’ve been to the U.S. and had 30% of your winnings held back by the IRS, Refund Management Services (RMS) can help you reclaim a portion or all of your taxable winnings.
Founded by a Canadian Chartered Accountant in 1998, RMS is the most reliable and experienced gaming and casino tax refund provider for non-U.S. residents. Only RMS has the One Simple StepTM process. Our customer service agents take care of the rest.
Once you provide us with complete documentation, your claim will be processed and we will submit it to the IRS. We’ve never been refused for an eligible refund. Contact us today by calling our toll-free number at 1-888-272-5559 or by emailing us at [email protected]!
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1.“theLotter Proudly Presents: Our $6.4 Million Jackpot Winner!” The Lotter, last accessed December 14, 2015; https://www.thelotter.com/our-jackpot-winner/?utm_source=Press_Release&utm_medium=Canada&utm_content=JP_Winner_Content_Page&utm_campaign=PR_Iraq_winner_Oregon_2015_10_12_ca.
2.“More salary, less work,” Al-Ahram Weekly, December 17, 2015; http://weekly.ahram.org.eg/News/3598/19/More-salary,-less-work.aspx
3.Lerten, B., “Iraqi $6.4 million Megabucks winner ‘thought it was a joke’,” KTVZ.com, last accessed December 14, 2015; http://www.ktvz.com/news/iraqi-oregon-megabucks-winner-thought-it-was-a-joke/36878896.
4.Chance, T., “Mega Millions numbers for Dec. 15; jackpot grows to $85M,” mlive.com, December 16, 2015; http://www.mlive.com/lottery/index.ssf/2015/12/mega_millions_numbers_for_dec_16.html.