Lottery Tax Guide: How Much of Your Winnings Do You Actually Keep?
Winning the lottery is a dream come true — but the tax bill that follows can be a rude awakening. Between federal and state income taxes, winners can lose 30% to 50% or more of their prize. Here's how it works.
Federal Taxes on Lottery Winnings
The IRS treats lottery winnings as ordinary income. For large jackpots, the federal tax rate works out to approximately 37% (the top marginal rate for 2024). However, only 24% is withheld at the time of payment — you'll owe the remaining 13% when you file your tax return.
State Taxes Vary Widely
State taxes on lottery winnings range from 0% to 10.9%:
- No state tax: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
- Low tax (under 5%): North Dakota (2.25%), Pennsylvania (3.07%), Indiana (3.05%)
- High tax (over 8%): New York (10.9%), Maryland (8.75%), New Jersey (10.75%), Oregon (9.9%)
Lump Sum vs. Annuity: Tax Implications
With the lump sum, you receive about 60% of the advertised jackpot and pay taxes on it all in one year — putting you in the highest tax bracket. With the annuity, you receive the full jackpot over 30 years, and each annual payment is taxed separately. The annuity may result in a lower effective tax rate since each payment is smaller.
Use our Lottery Tax Calculator to estimate your take-home for any jackpot amount in any state.