Virginia Lottery Winnings

[Christian]

A client won $ 1,000 in the Virginia Lottery last year. In reexamining the state lottery subtraction it occurs to me I may have been misinterpeting it.  In past years my understanding was that any winnings in excess of $600 meant that the entirety (in this case $1,000) is taxed by the state. On rereading the instructions I am now wondering if $599 can be excluded with the remaining $401  being taxed by Virginia ? 

[Gail in Virginia]

I have always done it that way as well, Christian.  The administrative code actually says. "A. Lottery prizes subject to taxation. Any lottery prize of $600 or more shall be subject to Virginia income tax. To the extent included in federal adjusted gross income, any lottery prize of less than $600 shall be subtracted from federal adjusted gross income in determining Virginia taxable income. No subtraction is allowed for the first $599 of a prize of $600 or more."

The instructions for Virginia returns say "Virginia Lottery Prizes - Enter the sum of all prizes under $600 awarded to you by the Virginia Lottery Department to the extent that you included them in your federal adjusted gross income."

So IMO the law says one thing but the department of taxation will most likely enforce another. 

 

 

 

 

 

[Pacun]

I still believe that if you win $500, $700, $300, you are required to report that "income" ($1,500) in your federal return, regardless of the existence of W-G forms. What Virginia is saying is: "to us, only report $700".

[Gail in Virginia]

That is correct - we are only discussing the treatment on the VA tax return. 

[Pacun]

On 4/5/2020 at 7:02 PM, Christian said:

 On rereading the instructions I am now wondering if $599 can be excluded with the remaining $401  being taxed by Virginia ? 

Gail, you are right.

The short answer to Christian's "rereading question" is no and VA will tax the whole $1,000 as stated by Gail.

[Christian]

He brought in a bag of Lottery scratch off tickets in amounts which totaled $1,000 thinking he could deduct these against his winnings. My reply "Good luck on that".  His deductions fall far short of his $12,400 standard deduction.

[Pacun]

I have a casino player whose standard deductions has been the State taxes withheld for about 5 years because he wins $25K and he losses about $35K every year. His itemize deductions are about 29K every year. I tell him that not only does he loose money but he also pay tax indirectly.