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Taxation of Gambling Winnings in New Jersey

Over the weekend I came across this “Biz Brain” article from NJ.com. It addresses the question whether New Jersey lottery winnings are subject to New Jersey income tax. The answer: Maybe.

For taxable years beginning on or after January 1, 2009, New Jersey lottery winnings are subject to New Jersey income tax only if the prize amount exceeds $10,000. The prize amount is the determining factor.

For example, in 2011 if you win the $25 million New Jersey PowerBall and score a $5,000 win from a Pick 4, only the PowerBall winnings are subject to New Jersey income tax. Of course, all $25,005,000 is subject to federal income tax.

What the article doesn’t address is the question whether the $10,000 minimum prize threshold applies to all gambling winnings in New Jersey. The answer is no. All other gambling winnings in New Jersey are fully subject to the state’s income tax. See this N.J. Technical Bulletin for more details.

Furthermore, as I’ve written before, if an out-of-state resident travels to Atlantic City and wins big playing blackjack, he may be on the hook for paying income tax to both his state of residence and New Jersey.

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