Whether you’re playing the mega-popular Powerball or your state lottery, odds are that you have questions about how it all works. While we can’t help you increase your (extremely long) odds of winning, we can give you a basic overview of the lottery process and what to expect if you hit the jackpot.
Lottery prize money comes from ticket sales — the more tickets sold, the bigger the prize. Some people choose their own numbers, but you can also opt for “quick pick” and let the ticket machine select a random set of numbers. If you choose your own numbers, Clotfelter recommends picking ones that are not close together or end with the same digit. These numbers have a tendency to repeat themselves and may decrease your chances of hitting the jackpot.
It’s important to note that lottery prizes are not tax-free. The IRS will take 24% of any winnings over $5,000, and big-money winners should prepare for a bump in their income tax bracket. Some states don’t tax lottery winnings at all, but it’s still worth knowing what to expect if you win.
Lotteries have a long history and are often considered to be a form of “voluntary taxes” because participants are willing to risk a trifling sum for the possibility of significant gain. During the Revolutionary War, the Continental Congress used lotteries to raise funds for the Colonial army. In colonial America, lotteries were used to fund roads, churches, libraries, colleges and canals.