Tax Type
General Provisions
Description
Lottery Winnings
Topic
Basis of Tax
Taxable Income
Withholding of Tax
Date Issued
02-04-1994
Virginia Department of Taxation
94-3
94-3
VIRGINIA STATE LOTTERY WINNINGS
Individual Income and Withholding Taxes
Individual Income Tax Subtraction
For purposes of computing Virginia taxable income, individuals will be allowed to subtract, to the extent included in federal adjusted gross income, each lottery prize less than $600. No subtraction is allowed for the first $599 of a prize of $600 or more.
The subtraction can be taken on the line designated "Other" in Part III of Virginia Form 760. The subtraction cannot be taken on Virginia From 760S.
Withholding Requirements
The State Lottery Department is required to withhold state income tax on any prize in excess of $5,001, including prizes won by nonresidents. Virginia Regulation 630-6-4006 requires the State Lottery Department to withhold 4% of any lottery winning in excess of $5,001 and report this amount to the Virginia Department of Taxation on Internal Revenue Service Form W-2G.
Important Reminder - Estimated Taxes
While prizes of $5,001 or less will not be subject to withholding, individuals will be required to pay estimated tax if their estimated tax liability on all income subject to state taxation exceeds their withholding and tax credits by more than $150. While lottery prizes in excess of $5,001 are subject to the flat 4% withholding rate, taxpayers with other income subject to state taxation will be required to pay estimated tax if their estimated tax liability exceeds their total withholding and tax credits by more than $150. All taxpayers who receive lottery. All taxpayers who receive lottery winnings subject to state taxation must file a Declaration of Estimated Tax if so required. Failure to pay at least 90% of the actual tax liability throughout the year by withholding and installments of estimated tax, except in those circumstances provided by law, will result in the assessment of an addition to tax for the underpayment of estimated tax.
If you have any questions on the application of the income tax and withholding requirements to a lottery winning, please feel free to call your local Commissioner of the Revenue or the Department of Taxation at (804) 367-8031.
Rulings of the Tax Commissioner