Here’s another reason to smile when you think about winning the record $1.5 billion (U.S.) American Powerball lottery jackpot.
If you come up mega-rich in next Wednesday’s draw, you don’t have to worry about the Canadian taxman taking a bite.
Lottery winnings are free from income tax in Canada, even if they’re won in another country, Vern Krishna, a law professor at the University of Ottawa and executive director of the CGA Tax & International Research Centre, said in an interview.
“This is a statutory exemption, so if you win it call me and we’ll celebrate,” Krishna said.
You do, however, have to contend with American taxes and that can be expensive and complicated.
The IRS requires 28 per cent if you don’t have valid tax ID.
That’s just for starters, if you win the world’s largest lottery jackpot.
After that, there’s federal taxes, which top out at 39.6 per cent.
You may also have to take a look at state taxes.
Still, if you beat the odds — which are somewhere north of 292.2-million against you winning — you’ll be able to afford an accountant.
Your money professional might recommend a charitable deduction, which could cut your taxable income by up to half.
Krishna noted that Section 40(2)(f) of the Income Tax Act (Canada) frees Canadians from the burden of taxes on a lottery win outside the country, just like Canadians don’t have to pay income tax on Canadian lottery winnings.
Meanwhile, expect to hear plenty of bad puns about dough and bread if you head off to get a Powerball ticket at the World CIass Bakers on St. Clair Ave. W. nowadays.
That’s because the bakery, a half dozen blocks west of Bathurst, has been giving away tickets for the $1.5-billion Powerball lottery jackpot in the U.S. if you spend more than $20.
Krishna said he doesn’t know of any place in his hometown of Ottawa where he can buy a Powerball ticket, but he may suggest that his daughter who lives in Toronto make a drive to the World Class Bakery.
“I’ll tell my daughter,” Krishna said. “Maybe she’ll go there. She lives in Toronto.”
There has also been an influx of Canadians heading across the border to buy Powerball tickets in Niagara Falls, N.Y.
Forbes magazine notes that you can expect to pay tens of millions in American taxes, should you win Powerball.
If you have the winning ticket, you only get the full jackpot if you take it over the next 29 years, in 30 payments.
If you want all you can get right now, it drops by a whopping 38 per cent.