Can Non-US Residents Play to Win the Lottery?
Are you eligible to win the lottery if you don’t live in the US?
Have you ever wondered who’s eligible to play the lottery in the United States?
Here are some common questions about buying lottery tickets:
- Can you buy tickets if you aren’t a US resident, but want to win one of those huge lottery jackpots?
- Can you buy US lottery tickets if you’re a citizen or a resident of a foreign country?
- Can you cross state lines to buy lottery tickets?
- What if you don’t have legal permission to be in the United States? Will you be able to claim the prize money if you win?
Here’s everything you need to know about who can and can’t play the lottery in the United States.
Who Can Play Mega Millions, Powerball, and Other US Lotteries?
You can buy US lottery tickets, win the Powerball and the Mega Millions lotteries, and collect your jackpot no matter what your US residence status is.
While there is an age restriction (you have to be at least 18 to play), adults can buy tickets in any state which offers the lottery even if you’re not a United States citizen, if you don’t live in the state selling the ticket, or even if you don’t live in the country at all.
Of course, since non-US residents are eligible to buy the tickets, they’re also eligible to claim the prize money should they win.
However, be aware that where you live will affect what happens when you win. For example, different states have different rules about whether lottery winners can remain anonymous.
Countries outside of the United States have different laws about how lottery prizes are taxed and how much money must be withheld from your winnings. If you do win, be sure to consult with a tax professional for more information.
If you’re trying to enter a lottery other than the Powerball or Mega-Millions games, check the rules before you enter for eligibility information.
Can you Buy US Lottery Tickets from Outside of the United States?
While non-US residents can enter and win the lottery, there’s a caveat: You have to actually be in the country to legally buy US lottery tickets. It’s illegal to buy lottery tickets over the internet or by mail — with some rare exceptions, such as a lottery app run by a company that sends an employee to physically buy tickets for its customers.
This’s important to keep in mind because many lottery scams trick people into believing that they’ve won lotteries from foreign countries. You can only win a foreign lottery if you bought a ticket while you were in that country. If you didn’t, you can throw those scam win notices away.
There are also scam websites that will take your money and promise to buy lottery tickets for you. Approach these sites with caution and be sure to check the company out carefully before handing over any money. Doing an internet search for the company’s name together with the word “scam” is a good first step.
Can an Undocumented Alien Win a US Lottery?
Because there are no residency restrictions about who can enter US lotteries, illegal immigrants can buy tickets and can claim their winnings. However, claiming the lottery winnings might make an illegal immigrant feel vulnerable to deportation.
For example, in 2011 Jose Antonio Cua-Toc won a $750,000 lottery and was afraid to claim it because he didn’t have a legal residency status. When he asked his boss to claim it for him, the boss took the money for himself.
However, winning the lottery might smooth the road to a green card. If you’re an undocumented immigrant and you have a winning lottery ticket, you should consult a legal professional before claiming your prize.
Can Felons Win Lottery Jackpots in the United States?
Rules vary from state to state, but in most cases, felons can legally buy lottery tickets and win jackpots.
In December of 2014, a story broke about Timothy Poole, a sex offender who won over $2 million in the Florida Super Millions scratch-off lottery.
Poole was convicted in 1999 of sexually battering a nine-year-old boy who was a friend of his family. Poole pleaded innocent but took a plea bargain, which included over a year in jail and registration as a sex offender.
The Florida lottery doesn’t have any restrictions regarding the criminal background of the entrants, which means that Poole received a lump sum of $2,219,807.90.
Many people were horrified to think that a sex offender could receive such an enormous prize. On the article linked above, Toni Tommas commented that it “Almost makes me question the existence of God.”
While some people think it’s wrong that murderers and sex offenders can win millions from the state, others find it would be unfair to prevent someone from playing the lottery after they’ve paid for their crime and served their time.
There is a bright side to a felon winning a lottery jackpot, however; It might give the victims a way to be compensated for damages or restitution in a civil trial. It’s hard for a felon to claim he or she can’t pay when they have publicly won a lottery jackpot.Who is eligible to buy US lottery tickets? Can a non-US resident claim a Powerball or MegaMillions lottery? What about illegal immigrants?
The Lottery: Is It Ever Worth Playing?
Feeling lucky? You’d better be if you play the lottery. Depending on which one you play, you have some pretty long odds.
For example, the odds of winning a recent Powerball drawing in Tennessee was 1 in 292.2 million. To put this in perspective, you have a:
- One in 2,320,000 chance of being killed by lightning
- One in 3,441,325 chance of dying after coming into contact with a venomous animal or plant
- One in 10 million chance of being struck by falling airplane parts
Most people would agree the risk of any of these events actually happening to them is pretty slim.
Let’s look at it another way. Assume you went to the largest stadium in the world—which happens to be in North Korea. The stadium was filled to capacity. As part of the price of your ticket, you were entered into a lottery where you could win a new car. In that case, your odds of winning are 1 in 150,000.
Would you be sitting on the edge of your seat in that stadium as they’re reading the ticket number or would you believe that, realistically, you’re not going to win? To equal the odds of winning the Powerball lottery, you would have to fill that same stadium to capacity 1,947 more times and put all of those people together and have the same drawing for the one car. Would anybody believe they could actually win in a crowd of people that large?
Still not convinced? If they were giving away a new home to just one person and everybody in the six most populated states in the United States entered, that would equal your chances of winning the lottery.
The largest lottery jackpot that was ever drawn in U.S. history—for Powerball in January 2016.
Of course, someone has to win the lottery, and the only way to win it is to be in it, as the ads say. But what’s the best way to be in it? The rules of probability dictate you do not increase your odds of winning the lottery by playing frequently. So each time you play the lottery, there is independent probability—much like a coin toss where each and every toss, regardless of the number of tosses, has a one in two probability of landing on heads. The odds stay the same—in the lottery and the coin toss—regardless of the frequency of playing.
You can, however, increase your odds by purchasing more tickets for the same lottery drawing. Keep in mind, though, that two tickets might increase your odds from one in 14 million to two in 14 million, which is not a significant improvement, statistically speaking. Someone would have to buy a lot of tickets to appreciably increase their odds of winning. Even if a person could afford to, however, he or she could not buy enough lottery tickets to guarantee a win unless he or she was the only person buying the tickets. As more tickets are collectively sold, the odds of winning inversely decrease.
- Your chances of winning the lottery are remote.
- The odds of winning the lottery do not increase by playing frequently, rather, you’d do better by purchasing more tickets for the same drawing.
- Although there is no guarantee in the stock market, the likelihood of getting a return on your investment is far better than your chances of winning the lottery.
- Lottery winners have the option to take their cash in one lump sum or by spreading it out over a number of years through annuities.
- There are tax implications for both, although, in the end, an annuity tends to have a greater tax advantage.
Who Plays the Lottery?
The chances of winning the lottery are exceedingly remote, but that doesn’t stop people from playing. Overall, approximately half of all U.S. adults collectively will spend upwards of $1,000 per month in the hopes of striking it rich. Time and again, when a lottery was introduced in a state, the local number of adults who engaged in gambling (which a lottery technically is) increased 40%. In certain states, the majority of lottery revenue comes from a small percentage of players. A Minnesota study, for instance, determined that 20% of its lottery players accounted for 71% of lottery income, and in Pennsylvania, 29% of players accounted for 79% of income, according to the most recent statistics from the North American Association of State and Provincial Lotteries (NASPL).
So what? The lottery is just one of those fun things that we do as a way to strike it rich, right? For some folks, that’s true, but for others—often those with the least amount of money to spare—playing for these jackpots can be a serious income drainer. An overwhelming amount of lottery participants seem to reside in the lower economic classes, according to the stats. A Gallup study breaks down some statistics, noting that regular lottery players make approximately $36,000 to $89,999. Small wonder that consumer-finance gurus say the lottery is essentially an extra tax on the poor.
Lottery retailers collect commissions on the tickets they sell and also cash in when they sell a winning ticket, usually in the form of an award or bonus.
Gambling vs. Investing
A curious headline was placed on the homepage of the Mega Millions website on March 25, 2011, a day when the odds of winning flew up to 1 in 175 million. The headline read, “Save for Retirement.” Anti-gambling groups cried foul at this apparent attempt to spin the lottery as a means to fund a person’s post-work years and lottery officials quickly issued a statement saying they were running a campaign encouraging people to dream about how they would use their winnings—not offering a financial strategy.
Is there a better, more profitable, way to spend or invest the money you’d otherwise devote to the lottery? Let’s look at the numbers. If a person spends $5 per week on lottery tickets, it adds up to $260 per year. Over 20 years (a typical long-term investment horizon for stocks and bonds), the total spent on lottery tickets would be $5,200. Putting $260 per year into stocks earning approximately 7% annually (based on equities’ historical performance) yields $11,015 after 20 years. But if you just spent the money on lottery tickets and presumably won nothing, you would be out $5,200 after 20 years.
Of course, the stock market is never a sure thing. Stocks can depreciate as well as appreciate. So let’s try a more cautious estimate. Consider a person without a college degree who spent an average of $250 per year purchasing lottery tickets. If that same person were to start an individual retirement account (IRA) or another retirement account that earned a conservative average 4% annual return and contributed that same $250 to it per year for 30 years, he or she would have $15,392 once they reached retirement age. If they did the same thing for 40 years, that number would jump to more than $25,000.
Although some would argue that in today’s economy there is no way to guarantee that the money would earn 4%, there’s also no guarantee that it wouldn’t earn far more than 4%. But all of that aside, the odds of having $15,000 after 30 years are largely in the person’s favor; certainly more so than with the Powerball lottery’s 292-million-to-1 odds.
Lump Sum or Annuity?
Let’s say, despite the dismal odds, you do win the lottery, and you win big—six figures big. You’re going to face a lot of decisions, and the first one is how to receive the funds. With most lotteries, you get a choice: they can write you a check for the lump sum amount or you can receive it in the form of an annuity.
The lump sum is a single cash transfer, whereas the annuity is a series of annual payments (often spread out over 20 to 30 years). Unlike some annuities that end when you do, this is something called an annuity certain: the payouts will continue for the set term of years, so if you pass away, you can bequeath those payments to whomever you would like. Which should you take?
Only six states allow winners to remain anonymous, while three others allow them to collect winnings through an LLC.
The Case for Lump Sum Payment
Most lottery winners opt for a lump sum payment. They want all of the money immediately. That is the main advantage of a lump sum: full and complete access to the funds. Not only do individuals like that, but their newly acquired giant team of accountants, financial advisors, money managers, and estate lawyers do too—the more assets under management, the better, especially if their compensation is based on a percentage of those assets.
Taking a lump sum could also be the better course if, not to be morbid, the winner isn’t likely to live long enough to collect decades of payouts, and has no heirs to be provided for.
Tax Advantage: Annuity
You may be in a better income tax position if you receive the proceeds over several years via an annuity rather than up front. Why? Lottery wins are subject to income tax (both federal and state, except for the few states that don’t tax winnings) in the year you receive the money. Say you win a $10 million jackpot. If you take the lump sum option, the entire sum is subject to income tax that year. However, if you choose the annuity option, the payments would come to you over several decades, and so would their tax bill. For example, in a 30-year payout schedule, instead of $10 million all in one year, you’d get around $333,000 a year. Although that $333,000 would be subject to income tax, it could keep you out of the highest state and federal income tax brackets.
But even if you pay the taxes all at once, it’s roughly the same as paying them over time, isn’t it? Not according to the experts.
If you choose the annuity option, the government takes your winnings and invests them for you—most likely in boring, yet highly stable Treasury bonds. Usually, when you invest, you pay taxes, but when the government invests they do so free of all tax obligations. So, over 30 years, not only are you getting a monthly payment on your winnings, but you’re also earning investment income on them.
Let’s say you opted for annuity payments on a $327.8 million prize, and you’re invested in a 30-year government bond paying 4.5% interest. In your first year, you’ll earn an estimated $14,715,000 in interest. By the end of the 20 years, your winnings would be 20% higher than when you started. All you have to do is submit to having somewhere around $900,000 as a monthly payment after taxes—assuming you’re in the maximum federal tax bracket.
Here’s the other advantage: If you take the lump sum, you effectively have to pay taxes twice—once when you get the check and then again on the income you earn from investing it yourself (you will invest most of it, right?). If the government invests it, you only pay a tax bill once (on the annuity checks).
Other Advantages to Annuities
But perhaps the biggest argument for taking the annuity is more intangible—to protect you from yourself. A six-figure windfall is a life-changing event, and not necessarily a good one. Most people are inexperienced at managing such sums to begin with, but even the wisest and coolest of heads could lose perspective, especially given the avalanche of friends, family, and even strangers that descends once the news gets out, pleading or even demanding a share of the spoils. Academics cite research showing most lottery winners will save only 16 cents of every dollar they win and that one-third of lottery winners go bankrupt.
An annuity can help, by literally limiting the funds in your possession. After all, you can’t give away, squander, or otherwise mishandle what you don’t have. Plus, taking the money over time provides you with a “do-over” card. By receiving a check every year, even if things go badly the first year, you will have many more chances to learn from mistakes, recoup losses, and handle your affairs better.
Inheritance factors are generally free standing but there can be some considerations where lottery inheritance is involved. Taxes are generally withheld from lottery distributions at the time they are paid out. If payments are made in a lump sum, the inheritance can be passed along tax free since inheritance gifts are generally not taxed. If the payments are still coming in as an annuity, taxes will be withheld. As in all inheritance scenarios some estate taxes may be required if values exceed the exclusion limit. Since lottery winnings push many people into the high net worth category, estate taxes may be a factor. This can be a challenge if the heirs do not have the cash on hand to do so. In some states Powerball will convert annuities to lump sums upon death to help better manage any tax burdens.
The Bottom Line
If you ever do win the lottery, you will want to work with your financial advisor, tax attorney, and certified public accountant to determine which option is best for you—taking the winnings all at once or in annuitized payments over decades. As a rule of thumb, if you and your money-management team think they can invest to earn an annual return of more than 3% to 4%, the lump sum option makes more sense over the annuity, at the end of 30 years.
Many people see purchasing lottery tickets as a low-risk investment. Where else can you “invest” $1 or $2 for the opportunity to win hundreds of millions of dollars? The risk-to-reward ratio is certainly appealing, even if the odds of winning are remarkably small. Is it better then, to play the lottery or invest the funds? There is no universally correct answer. Much of it depends on what money is being spent. If it is needed for retirement or the kids’ college, it may make more sense to invest—a payoff is more certain down the road, even if it doesn’t amount to a sexy six-figure check. If, however, the money is tagged for entertainment, and you would have spent it seeing the latest movie anyway, it might be fun to take the chance. Keeping in mind, of course, that you are more likely to die from a snake bite than to ever collect.Is it ever worth playing the lottery? Discover the probability of winning and the best way to collect the funds if you happen to win. ]]>