IP 2011(28)
Connecticut Income Tax Treatment of State Lottery Winnings Received by Residents and Nonresidents of Connecticut
Definitions:
DRS means the Department of Revenue Services.
IRS means the Internal Revenue Service.
State lottery winnings means lottery winnings from a wager placed in a state-conducted lottery where the wager is placed with the state agency conducting the lottery or with its authorized employees or agents. State lottery winnings include Connecticut lottery winnings.
Connecticut lottery winnings means lottery winnings from a wager placed in the Connecticut Lottery, where the wager is placed with the Connecticut Lottery Corporation or with its authorized employees or ticket agents. Connecticut lottery winnings include Powerball winnings if the Powerball ticket was purchased from a Connecticut Lottery ticket agent.
Reportable state lottery winnings means state lottery winnings the state agency conducting the lottery is required under the Internal Revenue Code or regulations to report to the IRS on federal Form W-2G, Certain Gambling Winnings.
Reportable Connecticut lottery winnings means Connecticut lottery winnings (including Powerball winnings) the Connecticut Lottery Corporation is required under the Internal Revenue Code or regulations to report to the IRS. The Connecticut Lottery Corporation is required to report Connecticut lottery winnings to the IRS if the amount paid to the winner(s) is $600 or more and at least 300 times the amount of the wager.
1. Are state lottery winnings subject to Connecticut income tax?
If a resident’s winnings are reportable state lottery winnings (but not reportable Connecticut lottery winnings) and the winner is required to file an income tax return and to pay income tax to the other state on those state lottery winnings, he or she is eligible to claim a credit against his or her Connecticut income tax for income tax paid to the other state on those reportable state lottery winnings. To claim the credit, he or she must file Form CT-1040, Connecticut Resident Income Tax Return, and complete Schedule 2. A copy of the nonresident return filed with the other state must be attached to Form CT-1040.
If a winner is a part-year resident of Connecticut (part-year resident) and meets the gross income test (below), all Connecticut lottery winnings, to the extent includable in the winner’s federal adjusted gross income, are subject to Connecticut income tax:
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Winnings received during residency portion of the taxable year: If the winnings are received during the residency portion of the winner’s taxable year, all lottery winnings, to the extent includable in the winner’s federal adjusted gross income, are subject to Connecticut income tax.
If the winnings are reportable state lottery winnings and the winner is required to file an income tax return and to pay income tax to another state on those state lottery winnings, he or she is eligible to claim a credit against his or her Connecticut income tax for income tax paid to the other state on the portion of those reportable state lottery winnings received during the residency portion of his or her taxable year. To claim the credit, he or she must file Form CT-1040NR/PY, Connecticut Nonresident and Part-Year Resident Income Tax Return, and complete Schedule 2. A copy of the nonresident return filed with the other state must be attached to Form CT-1040NR/PY.
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Winnings received during the nonresidency portion of the taxable year: If the state lottery winnings are received (the date of claim or the date the winning numbers are drawn) during the nonresidency portion of the winner’s taxable year, the state lottery winnings are subject to Connecticut income tax only if they are reportable Connecticut lottery winnings.
Reportable state lottery winnings paid to a part-year resident are subject to the special accrual rules as follows:
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A part-year resident who wins a state lottery (other than the Connecticut Lottery) and receives reportable state lottery winnings after a change of residency status must recognize the winnings under the special accrual method.
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A part-year resident who wins the Connecticut Lottery and receives reportable Connecticut lottery winnings after a change of residency status need not recognize the winnings under the special accrual method because the Connecticut Lottery Corporation will withhold Connecticut income tax from the winnings.
See the instruction booklet for Form CT-1040NR/PY for information and examples related to the special accrual rules.
If a winner is a nonresident of Connecticut (nonresident) and meets the gross income test (below), state lottery winnings, to the extent includable in the winner’s federal adjusted gross income, are subject to Connecticut income tax only if they are reportable Connecticut lottery winnings.
If a winner is an individual who, for federal income tax purposes, is a nonresident alien (and is not a resident of Connecticut) and meets the gross income test (below), state lottery winnings are subject to Connecticut income tax to the extent the winnings are reportable Connecticut lottery winnings. Nonresident aliens who are residents of Connecticut are subject to Connecticut income tax on all gambling winnings. See If a winner is a resident of Connecticut.
For information on whether an individual is a resident, nonresident, or part-year resident, see the instructions to the Connecticut income tax return for residents (Form CT-1040) or the Connecticut income tax return for nonresidents or part-year residents (Form CT-1040NR/PY).
Gross Income Test:
The winner must file a Connecticut income tax return and report his or her state lottery winnings if the winner’s gross income for the 2011 taxable year exceeds:
- $12,000 and the winner is filing separately;
- $13,000 and the winner is filing single;
- $19,000 and the winner is filing head of household; or
- $24,000 and the winner is filing jointly or qualifying widow(er) with dependent child.
A winner’s gross income includes all income, whether or not Connecticut-sourced income, received in the form of money, goods, property, and services not exempt from federal income tax and any additions required to be reported on Form CT-1040, Schedule 1. Gross income includes but is not limited to compensation for services, including wages, fees, commissions, taxable fringe benefits, and similar items; gross income from a business; capital gains; interest and dividends; gross rental income; gambling winnings; alimony; taxable pensions and annuities; prizes and awards; income from partnerships, S corporations, estates, and trusts; individual retirement account distributions; unemployment compensation; and federally taxable Social Security benefits.
2. Are gambling losses deductible?
3. Will Connecticut income tax be withheld from reportable Connecticut lottery winnings?
Residents and Nonresidents: The Connecticut Lottery Corporation will withhold Connecticut income tax at the rate of 6.7% from payments of reportable Connecticut lottery winnings whether or not federal income tax withholding is required.
4. Are winners of the Connecticut lottery required to make estimated Connecticut income tax payments?
The Connecticut Lottery Corporation will withhold Connecticut income tax at the rate of 6.7% from all payments of reportable Connecticut lottery winnings made to a resident or a nonresident whether or not federal income tax is withheld. Resident and nonresident winners who are required to file a Connecticut income tax return (see Gross Income Test on Page 2) are liable for Connecticut income tax on their reportable Connecticut lottery winnings even if the Connecticut Lottery Corporation does not withhold Connecticut income tax from payments of those winnings. To avoid interest charges for failing to make estimated Connecticut income tax payments, winners should check the amount of Connecticut income tax withholding from payments to see if they need to make estimated Connecticut income tax payments. For more information, download Form CT-1040ES, Estimated Connecticut Income Tax Payment Coupon, from the DRS website.
5. Is a winner required to provide his or her name, address, and Social Security Number to state lottery officials?
6. What if there is more than one winner?
7. Could a nonresident who receives less than $600 in Connecticut lottery winnings be subject to Connecticut income tax?
Yes. For example, assume two nonresidents purchase 20 Connecticut lottery ticket for $1 apiece (with each contributing an equal amount of the ticket price) and one of the tickets wins $1,000. Even though each winner will receive $500, each is subject to Connecticut income tax on that amount because the winnings are reportable Connecticut lottery winnings. The amount paid to winner or winners is $600 or more and at least 300 times the amount of the wager.
8. Could a nonresident who receives $600 or more in Connecticut lottery winnings during a taxable year not be subject to Connecticut income tax?
9. Will payments of state lottery winnings be reported to DRS?
Yes. Connecticut lottery winnings must be reported to the IRS by the Connecticut Lottery Corporation if the winnings are $600 or more and at least 300 times the amount of the wager. Whenever Connecticut lottery winnings are required to be reported to the IRS, the winnings must be reported to DRS by providing a duplicate of the federal Form W-2G furnished to a winner. The fact that Connecticut lottery winnings may not have been required to be reported to the IRS by the Connecticut Lottery Corporation does not excuse a winner from reporting those winnings for federal and Connecticut income tax purposes.
For Further Information: Call DRS during business hours, Monday through Friday:
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1-800-382-9463 (Connecticut calls outside the Greater Hartford calling area only); or
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860-297-5962 (from anywhere).
IP 2011(28)
Income Tax
Lottery Winnings
Issued: 01/04/12