What is a Lottery?


The lottery is a form of gambling in which players pay for a ticket, select a group of numbers, or have machines randomly spit them out and win prizes if enough of their numbers match those drawn by a machine. They may receive a lump sum payment or annual installments.

Financial Lottery

The most common form of a lottery is the financial lottery, in which a winner chooses a prize and receives the money in a lump sum or annuity over time. Although a lump sum is typically the preferred choice, if the winnings are large and the winner’s taxes have to be paid out of the jackpot, it may make more sense to opt for annuity payments.

History of Lotteries

The first known lottery occurred in China during the Han Dynasty (205 to 187 BC). It was used to finance projects such as bridges and roads. In colonial America, lotteries were used to fund a variety of public and private ventures, including schools, libraries, churches, canals, and railroads.

State-run Lotteries

In the United States, most states and the District of Columbia have lottery systems. These include lottery games for prizes in the millions of dollars and smaller ones involving local or regional prizes such as houses, cars, boats, and sporting goods.

Tax Issues

In addition to income taxes, winners may have to pay a portion of their prize in state and local taxes. While withholdings vary by jurisdiction, they generally amount to about 24 percent of the prize in the U.S., with the higher tax brackets paying more.