Lottery players beware: Federal and state income taxes could eat as much as 42 percent of your winnings.

Gambling winnings, however, are considered to be 'not effectively connected' and must generally be reported on Form 1040NR. Such income is generally taxed at a flat rate of 30%. Nonresident aliens often cannot deduct gambling losses. The legislation adopted in special session, House Bill 1010xx, also increased gross production tax rates. Oklahoma's previous rate on oil and gas production allowed new wells to operate at a 2-percent rate for the first three years of production. Now, those wells and new ones beginning production will be taxed at 5 percent. Lottery players beware: Federal and state income taxes could eat as much as 42 percent of your winnings.Even worse, if you win a large prize and die before seeing the cash, your heirs' tax bill could exceed 90 percent.That message came Wednesday during a Webcast seminar for Oklahoma lawyers on how to represent lottery winners and retailers.Presenter Susan Shields, an Oklahoma City attorney.

Even worse, if you win a large prize and die before seeing the cash, your heirs' tax bill could exceed 90 percent.

That message came Wednesday during a Webcast seminar for Oklahoma lawyers on how to represent lottery winners and retailers.

Presenter Susan Shields, an Oklahoma City attorney, said the federal and state income tax rates on lottery winnings can hit 35 percent and 7 percent, respectively, depending on the prize amount, for a total tax bite of 42 percent.

Under federal law, the Oklahoma Lottery Commission must withhold 25 percent of winnings on prizes exceeding $5,000, Shields said.

These provisions most likely will affect winners of the multistate Powerball game and large Oklahoma based online games.

The most recent Powerball winner, for instance, was an Air Force sergeant from New Mexico who won $93.4 million.

Such winners have a choice: the entire prize paid as an annuity over many years, or a much lower lump sum in this case, $52.2 million.

Shields said many winners choose the lump sum for tax reasons.

For instance, if a Powerball winner dies, his heirs would be subject to a 47 percent estate tax, plus 42 percent in combined income taxes, plus interest, she said.

'That is a pretty bad result for the winner ... but also for his family, who won't inherit very much, Shields said.

The annuity option in such a case leaves the heirs even less, she said.

Here's the good news, Shields added almost half jokingly: The cost of the winning ticket is tax-deductible.

Unlike Texas and some other states, Oklahoma doesn't allow a winner to sell his lottery annuity to a brokerage house or even to assign it to a relative without a judge's order, she said.

However, Oklahoma's lottery law allows the commission to garnish prize money from winners who owe debts and to deduct delinquent child support payments.

'This may be a reason someone might not want much publicity about winning, Shields said.

She said Oklahoma lottery winners who subsequently divorce would have to split the money.

Presenter Armand Paliotta said the application process for retailers hoping to sell lottery tickets is 'fairly burdensome.

They must disclose all owners, officers and operators and notify the Lottery Commission of ownership changes.

Retailers also must be current in state tax filings and payments and cannot have a felony conviction.

Paliotta advised lawyers to have clients sign the back of any large winning ticket.

'That would prevent someone else who finds it from cashing it, he said.

Although lawyers will want to help their clients remain anonymous for various reasons, that will be easier said than done, Paliotta said.

Archive ID: 2644860

Oklahoma state income tax rate table for the 2020 - 2021 filing season has six income tax brackets with OKtax rates of 0.5%, 1%, 2%, 3%, 4% and 5% for Single, Married Filing Jointly, Married Filing Separately, and Head of Household statuses.

The Oklahoma tax rate and brackets are unchanged from last year.

Oklahoma income tax rate and tax brackets shown in the table below are based on income earned between January 1, 2020 through December 31, 2020. Outlook for the 2021 Oklahoma income tax rate is to remain unchanged.

Oklahoma Gambling Tax Rate Calculator

Source: 2020 Oklahoma Tax Rates and Tax Brackets, published by the Oklahoma Tax Commission.

Please reference the Oklahoma tax forms and instructions booklet published by the Oklahoma Tax Commission to determine if you owe state income tax or are due a state income tax refund. Oklahoma income tax forms are generally published at the end of each calendar year, which will include any last minute 2020 - 2021 legislative changes to the OK tax rate or tax brackets. The Oklahoma income tax rate tables and tax brackets shown on this web page are for illustration purposes only.

Oklahoma Tax Brackets 2020 - 2021

Looking at the tax rate and tax brackets shown in the tables above for Oklahoma, we can see that Oklahoma collects individual income taxes differently for Single versus Married filing statuses, for example. We can also see the progressive nature of Oklahoma state income tax rates from the lowest OK tax rate bracket of 0.5% to the highest OK tax rate bracket of 5%.

For single taxpayers living and working in the state of Oklahoma:

• Tax rate of 0.5% on the first $1,000 of taxable income.
• Tax rate of 1% on taxable income between $1,001 and $2,500.
• Tax rate of 2% on taxable income between $2,501 and $3,750.
• Tax rate of 3% on taxable income between $3,751 and $4,900.
• Tax rate of 4% on taxable income between $4,901 and $7,200.
• Tax rate of 5% on taxable income over $7,200.

For married taxpayers living and working in the state of Oklahoma:

• Tax rate of 0.5% on the first $2,000 of taxable income.
• Tax rate of 1% on taxable income between $2,001 and $5,000.
• Tax rate of 2% on taxable income between $5,001 and $7,500.
• Tax rate of 3% on taxable income between $7,501 and $9,800.
• Tax rate of 4% on taxable income between $9,801 and $12,200.
• Tax rate of 5% on taxable income over $12,200.

Oklahoma Tax Rate On Gambling Winnings

For the Single, Married Filing Jointly, Married Filing Separately, and Head of Household filing statuses, the OK tax rates and the number of tax brackets remain the same. Notice, however, the Oklahoma income tax brackets for Married Filing Jointly increase from $1,000 to $2,000 at 1%, and increase from $7,200 to $12,200 at 5% the highest tax bracket. For the first five income tax brackets, Married Filing Separately taxable income ranges are one half that of Married Filing Jointly in the state of Oklahoma.

Oklahoma Gambling Tax Rate

Last updated: November 24, 2020

Oklahoma Gambling Tax Rate Comparison