Whether you’re a seasoned lottery player or a first-timer, there are many different ways to play. Each has its own set of advantages and disadvantages, so it’s important to choose the game that’s right for you.

Origins

Originally, lotteries were used to fund public projects, such as the building of towns, schools, and fortifications. Lotteries were also used to assign property rights. The first lottery was held in the Chinese Han Dynasty between 205 and 187 BC. During that time, the Han Dynasty used lottery slips as a means of financing major government projects.

Early Europeans used lotteries to fund public projects as well. The first official lottery was held on 9 May 1445 in the city of Sluis in the Low Countries. This lottery raised money to build the city walls. The total amount raised was about 1737 florins, which is the equivalent of US$170,000 today.

Multistate lotteries have different odds

Various state and local governments have produced and marketed lotteries aplenty. Some offer free play while others require you to pony up a dime to play. There are also several multistate lotteries abound. Some have fancy websites and fancy offices while others have nothing more than an unnamed lottery store on the corner of your local hardware store.

Multistate lotteries are big business. For instance, the Multi-State Lottery Association boasts 36 lotteries in the United States. The aforementioned organization claims that their schtick raked in a record-setting $56.4 billion in fiscal year 2006. Some states require you to pony up a dollar or two for a ticket while others allow you to play for free. The big draw is the chance to win huge cash prizes.

One-time payment is a smaller amount than advertised (annuity) jackpot

Depending on the particular lottery game you play, you may be asked to choose between a one-time payment, an annuity or a mix of both. If you win, you have 60 days to decide. During that time, you have a chance to ask a legal adviser or financial planner for advice.

Some lotteries offer annuities, which spread your tax burden over a long period of time. Others offer a one-time payment, which is a bit more difficult to swallow. For the most part, the one-time payment is a cash infusion into the prize pool.

Some lotteries have an annuity scheme that includes the usual suspects – the jackpot, plus interest from investments. The annuity’s smallest payment is the smallest of the lot.

Tax implications

Whether you’re planning to play the lottery or you already won, you need to know the tax implications. There are many pitfalls, but you can minimize them by ensuring you’re well-informed. You should also seek expert advice to ensure you can take full advantage of your winnings.

There are many different taxes that can apply to your lottery winnings, depending on your state. You might have to pay a sales tax, excise tax or state income tax. In some states, winnings are tax-free, but in other states, they’re taxed at a higher rate.

While some states automatically withhold taxes on lottery winnings, other states allow you to pay your taxes in installments. You can also choose to receive your prize in a lump sum or annuity.