What is a Lottery Bonus Draw?
A lottery bonus draw is a secondary draw that lottery organizations run in addition to the regular lottery draws. Unlike regular draws which require purchasing a new ticket, bonus draws allow players to enter non-winning tickets from previous draws for a second chance to win prizes (Coloradolottery.com, 2022).
Bonus draws differ from regular lottery draws in that players do not need to buy new tickets to participate. Players can simply submit eligible non-winning tickets from regular draws to get entered into the bonus draw. This gives players a second opportunity to win with their old tickets.
Lotteries offer bonus draws as a way to generate additional excitement and engage players who did not win in the main draw. Bonus draws help promote the lottery by rewarding players and keeping them engaged. They also incentivize players to hold onto and enter non-winning tickets rather than immediately discarding them after a regular draw. This allows lotteries to build loyalty and potentially boost overall ticket sales and revenue (Lawinsider.com, 2022).
Popular Types of Bonus Draws
There are a few common types of bonus draws offered by state lotteries:
Second Chance Draws
Second chance draws allow players to enter losing scratch tickets for a chance to win prizes in a bonus drawing. For example, the Colorado Lottery offers second chance drawings for certain scratch games like $250,000 Crossword Mania.
Early Bird Draws
Some lotteries offer early bird bonus draws for players who purchase tickets and enter the drawing early. For instance, Powerball and Mega Millions often have early bird drawings with smaller prizes before the main jackpot drawing.
Holiday Bonus Draws
Lotteries frequently run special holiday-themed bonus draws around seasons like Christmas and Valentine’s Day. These can include second chance contests or limited-edition scratch games with bonus prize drawings.
Rules and Eligibility
To enter a bonus draw, players must have a valid lottery ticket or scratch-off that is eligible for the specific promotion. For example, the Colorado Lottery runs periodic Jackpot Bonus Draws that require purchasing a draw game ticket and registering it online to receive an entry (https://www.coloradolottery.com/en/games/bonus-draws/).
Eligibility requirements vary by lottery but commonly include being a resident of the state, being over 18 or 21 years old, and having a valid ticket. Some states prohibit employees of the lottery or lottery retailers from participating.
Most lotteries impose limits on the number of bonus draw entries a player can accumulate. In Colorado, each eligible ticket number can be entered up to 10 times per promotion for Jackpot Bonus Draws (https://www.coloradolottery.com/en/games/bonus-draws/). Scratch games often limit entries to 5-10 per ticket. These restrictions help distribute the chance of winning more evenly.
Prizes and Odds
Bonus draws offer a variety of prize options depending on the specific game. Some of the most common prize types include:
- Cash prizes ranging from small amounts like $25 up to jackpots over $1 million. Non-jackpot cash prizes tend to be in the hundreds or thousands of dollars.
- Free ticket prizes that give you more chances to play.
- Merchandise prizes like TVs, grills, vacations, and more.
For games tied to jackpot drawings like Powerball and Mega Millions, the top prizes in bonus draws can reach the multimillion dollar jackpot amounts. For instance, the Colorado Lottery has awarded jackpots over $1 million in its second chance Powerball drawings [1].
For scratch games and other non-jackpot games, the top prizes in bonus draws tend to be in the tens of thousands, hundreds of thousands, or low millions of dollars. The odds of winning any prize are generally better in bonus draws than standard instant ticket games since there are fewer tickets entered in the drawings.
According to the Colorado Lottery, the overall odds of winning any prize in their scratch game bonus draws ranges from 1 in 25 to 1 in 50 [2]. For comparison, the odds on a $1 scratch ticket are generally around 1 in 4.5 to win any prize. So your chances in the bonus draws are roughly twice as good.
Tax Implications
Bonus prizes from lotteries are subject to taxes just like regular lottery winnings. The tax rates vary depending on the prize amount, where you live, and other factors. According to the TaxAct Blog, federal taxes on lottery winnings in the US are generally around 24-37%, while state taxes can range from 0-8% depending on the state. For very large jackpot prizes, the top federal tax rate of 37% applies.
For federal taxes, winnings up to $5,000 are generally tax-free. But any winnings over $5,000 are subject to 24% federal tax withholding, which is taken out immediately by the lottery operator before you receive your prize. You may owe additional federal taxes when you file your tax return, especially if you have other substantial income sources. State taxes also apply in most states, ranging from 3-8% withholding on prizes over a certain threshold. Some states like Florida, Texas, Washington, and others do not tax lottery winnings.
You can claim gambling losses as an itemized deduction on your tax return, which helps offset taxes owed on winnings. But you can only deduct losses up to the amount of winnings reported. Withholding taxes on large lottery prizes can also be reduced if you have sufficient tax deductions to offset the income. If too much tax was withheld, you may get a refund when filing taxes. When claiming a major lottery prize, working with a tax professional is recommended to ensure you are compliant and optimize your after-tax winnings.
Notable Winners
Some of the biggest lottery bonus prize winners include:
In November 2022, Edwin Castro from Sacramento, California won a $2.04 billion Powerball jackpot, the largest in U.S. lottery history. Castro opted for the lump sum payment of $997.6 million (abc7chicago.com).
In January 2016, the world record Powerball jackpot of $1.586 billion was split between three winning tickets. One of the winners was John and Lisa Robinson of Tennessee who took home $528.8 million before taxes (madisontrust.com).
In October 2018, a Mega Millions ticket sold in South Carolina won a $1.537 billion jackpot claimed by a single winner who chose to remain anonymous. This is the largest individual lottery payout to one person in U.S. history (spectrumnews1.com).
Unique winner stories include Richard Lustig who won 7 lottery grand prizes and credits his wins to meticulous planning and strategy. Lustig wrote books sharing his lottery tips before passing away in 2018 (cnbc.com).
Strategies
Many lottery players have developed strategies to try to increase their odds of winning. While there is no foolproof way to guarantee a jackpot, some approaches may slightly improve your chances.
When choosing numbers, some players use “hot” and “cold” analysis to see which numbers have been drawn recently versus those that haven’t come up in awhile. For example, Richard Lustig, a 7-time lottery winner, advocates never picking the same set of numbers twice in a row, as it reduces the odds of winning [1]. Numerical patterns, like choosing numbers in a diagonal line or picking all odd or even numbers, are also popular.
In terms of when to enter draws, some experts recommend playing when the jackpot is high, as this boosts the potential payout. However, the odds do not actually improve with a larger jackpot. Playing consistently, like Richard Lustig did rather than just for large pots, may be a better approach [1].
For how many entries to submit, there are two schools of thought. Playing multiple tickets in a single draw increases your odds slightly, but playing one ticket consistently over many draws may be a more cost-effective strategy. Most experts recommend avoiding spending more than you can afford to lose.
Payment Options
There are two main ways to receive lottery bonus prize payments: lump sum or annuity. With a lump sum payment, you receive the full amount of your prize all at once. According to the New York Lottery, lump sum payments are subject to federal and state tax withholdings. With an annuity, you receive a portion of the total prize amount each year over many years. For example, the Mega Millions annuity payment schedule pays out over 30 years.
For larger prize amounts, you may also have the option to rollover some or all of your winnings into an IRA or other qualified retirement account. This allows you to defer taxes until you withdraw the funds. However, there are limits on how much you can rollover each year. When claiming a lottery bonus prize, you will need to fill out a claim form and provide proof of identity and eligibility. According to the California Lottery, you can claim prizes under $600 at any authorized lottery retailer. Larger prizes must be claimed at a Lottery District Office or by mail.
Scams
Lottery bonus draws unfortunately attract a fair share of scammers looking to prey on unsuspecting individuals. Some common lottery bonus draw scams include:
Fake notification scams – Where you receive an email, phone call or letter falsely claiming you’ve won a bonus prize. The scammers will then ask for an upfront fee or your personal information to process the prize.
Advance fee scams – Where you are contacted and told you’ve won a prize, but first need to pay taxes, legal fees or other charges before you can claim it. Of course, there is no actual prize.
Donation scams – Scammers pretend they’ve won the lottery and want to donate their winnings to you or a charity you support. They send a fake check and ask you to deposit it and wire back part of the money.
To avoid falling victim to bonus draw scams:
- Be wary of any unexpected notifications claiming you’ve won a prize. Legitimate lotteries don’t notify winners by phone, email or mail.
- Never pay any upfront fees to claim winnings. Avoid sending money through wire transfers or gift cards.
- Don’t give out your personal information like bank details or social security number.
- Verify any checks you receive by contacting the bank before depositing.
- If it sounds too good to be true, it usually is. Use caution with large prizes from lotteries you didn’t enter.
If you suspect a lottery scam, report it immediately. In the U.S. you can file complaints with the Federal Trade Commission or FBI’s Internet Crime Complaint Center.
Future Outlook
The future looks bright for lottery bonus draws. They have steadily grown in popularity over time as lotteries use them as incentives to boost ticket sales. According to the Colorado Lottery, bonus draws “offer you another chance to win” and make lottery games “a lot more fun.” As lotteries aim to engage players in new ways, we can expect continued growth in bonus offerings.
In the coming years, we will likely see expanded prize pools for bonus draws as well as more specialized offerings tied to particular games or promotions. For example, the Colorado Lottery currently runs seasonal bonus draws like Merry and Bright which provides a chance at an extra $5,000 prize around the holidays. We may see more of these creative, targeted bonus opportunities. Lotteries may also leverage new technologies to enhance the experience such as offering digital bonus entries or integrations with loyalty programs.
Overall, lottery bonus draws provide added value to players and useful marketing tools for lotteries. Their popularity looks set to rise as lotteries innovate with new prize structures, formats, and promotions built around the bonus draw concept. Players will have more chances to win, keeping public interest and ticket sales high.