What happens if you win the lottery while on active duty?

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A lottery drawing being conducted at the television studio at Texas Lottery Commission headquarters.

Winning the lottery is a very sporadic opportunity that very few individuals get to encounter. If you win the lottery while you are on active duty in the military, there are precisely three things that will compel you to make decisions influencing your military service, financial and tax obligations. 

Firstly, you will be honorably discharged depending on your service level, and fortunately, if you satisfy the requirements, you can quickly retire. You also can place the money in a blind trust fund that you will access when you are done with your service. 

It is highly recommended to hire financial experts who will significantly help you in your decisions. Moreover, you must ensure that you are aware of the tax laws you are expected to follow depending on the state you are presently based in.

Securing the lottery

There are known cases of lottery winners who won while serving in the military where they were honorably discharged after wishing to do so. A coast guard officer won a fantastic million in a Powerball drawing back in 2016. At the same time, a sailor who won thirteen million dollars in 2004 was granted an honorable discharge and went home to be with his family. 

However, leaving the military is not sure, especially if you are in the top position. You will be discouraged from going immediately and instead asked to complete your service, and consequently, your request will be settled on a secretary level. 

It is highly likely to be approved since it is evident that a person who constantly has money on his mind will not focus on their work entirely. Some choose to stay after winning the lottery and instead place those funds as excellent retirement benefits; therefore, it all depends on what you want and your position.

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State and tax obligations 

It is imperative to make sure that you are stationed in a state participating in the lottery. Notably, some families move around frequently since they get posted in different states, making participating in the lottery very challenging. 

In addition, since every state has different rules regarding the lottery, it can make it very easy for you to mix up the rules. Alaska, Alabama, Utah, Mississippi, Hawaii, and Nevada are among the states that do not participate in the lottery. Therefore, if you are posted in any of these states, you cannot buy any lottery tickets.

At the same time, there is a chance that you might be pardoned from personal income tax. This is because every state had different requirements concerning taxing the lottery winnings. Lucky for you, if you are stationed in Florida, Tennessee, Washington, Alaska, New Hampshire, Texas, South Dakota, and Wyoming, you will be exempted from personal income tax. 

This signifies that you can take home more than one who won in a state that requires personal income tax. Some conditions can exempt you from paying the personal income tax because you serve in the military. Essentially, this will solely be the circumstance if your winnings are categorized as income and not in a different category.

Additionally, if you are a California resident positioned in another state, you’ll pay the personal income tax of your home state regardless of where you are presently stationed. If you are a California resident positioned in Texas, however, it is paramount you pay the state income taxes of California even though Texas does not compel you to do that.