Are lottery winnings taxable in the US?
Written by Jackpot Staff
Updated: April 8, 2025
When it comes to lottery winnings in the United States, the short answer is yes - winnings are subject to federal and, in many cases, state taxes. The taxation can often be complex, and the amount owed depends on several factors, including the size of the prize, the state of residence, and players’ overall income. With Jackpot.com, learn about how lottery winnings are taxed and get help navigating the complexities of paying taxes after winning the lottery ahead of the 2024 tax season.
Please be aware that we are not tax professionals. For accurate information regarding lottery winnings and their implications on federal and state taxes, please refer to the gambling income regulations provided on IRS.gov and consult with your state taxing authority, as well as consider seeking advice from a certified public accountant or tax attorney.
Are all lottery winnings taxed?
When it comes to the taxation of lottery winnings in the US, all significant prizes are subject to federal taxes, and many are also subject to state taxes.
The federal tax rate on lottery winnings is fixed at 24% for any amount over $599.99. Though the initial withholding by the lottery organization is typically at the 24% rate, the actual amount a winner owes could be higher based on the total taxable income for the winner that year. This means that the sum of income plus the lottery winnings will be taxed together, potentially pushing players into a higher tax bracket.
State taxes on winnings vary significantly. While some states like California, Delaware, and Florida do not tax at all, others have varying rates, generally ranging from 2.9% to 10.9%. The specific tax rate and whether winnings will be taxed at the state level depend on the state in which the lottery ticket was purchased and, in some cases, the player’s state of residence. It's also worth noting that certain states have specific tax thresholds and only winnings above that amount will result in taxable winnings.
Additionally, how players choose to receive winnings - either as a lump sum or in annuity payments - can affect the taxation process. Opting for a lump sum means players receive a one-time payment, subject to immediate taxation, while choosing an annuity spreads the payments (and the tax obligations) over several years, which might offer some tax advantages.
State Taxes: An Extra Layer on Lottery Winnings
Beyond the federal taxes withheld and potentially owed on lottery winnings, state governments often want their share too. This is where things vary for lottery winners across the United States. Unlike the federal system, there's no single rule for state taxation; the amount you'll owe if anything, depends entirely on the laws of the state where you purchased the winning ticket. It's crucial to understand these potential state tax liabilities in addition to your federal obligations.
The landscape of state lottery taxes ranges dramatically. Some states follow the federal government's lead and tax lottery winnings as regular income, potentially at significant rates. Others impose a specific, flat tax rate just for lottery prizes. Then there are several states, much to the delight of winners there, that don't levy any state income tax on lottery winnings at all. Finally, a handful of states don't even participate in state-sponsored lotteries. Knowing which category the relevant state falls into is essential for accurately estimating your take-home prize amount. Remember that state tax laws can and do change, so verifying the current rate with the state's official Department of Revenue or Lottery Commission is always the best practice.
State-by-State Lottery Tax Data:
| State | State Tax Rate on Lottery Winnings | Notes |
|---|---|---|
| Alabama | No state lottery | |
| Alaska | No state lottery | |
| Arizona | 2.5% | Taxed at state income tax rates |
| Arkansas | 4.4% | On winnings over $5,000 |
| California | 0% | No state tax on state lottery winnings; multi-state lottery winnings taxed at federal rate only |
| Colorado | 4.40% | Flat rate |
| Connecticut | 6.99% | On winnings over $500,000 |
| Delaware | 0% | No state tax on lottery winnings |
| District of Columbia | 10.75% | Taxed at D.C. income tax rates |
| Florida | 0% | No state income tax on lottery winnings |
| Georgia | 5.49% | Flat rate |
| Hawaii | No state lottery | |
| Idaho | 5.8% | Taxed at state income tax rates |
| Illinois | 4.95% | Flat rate |
| Indiana | 3.05% | Plus potential county taxes |
| Iowa | 5% | State tax withholding on prizes over $5,000; actual tax based on income |
| Kansas | 5% | State tax withholding on prizes over $5,000; actual tax based on income |
| Kentucky | 4.0% | Flat rate |
| Louisiana | 4.25% | Taxed at state income tax rates on winnings over $5,000 |
| Maine | 5% | State tax withholding on prizes over $5,000; actual tax based on income |
| Maryland | 8.95% | Taxed at state income tax rates, plus local county rate; withholding rate is 8.95% for residents on prizes over $5,000 |
| Massachusetts | 5% | Flat rate on winnings over $600 |
| Michigan | 4.25% | Plus potential city taxes |
| Minnesota | 7.25% | Withholding on prizes over $5,000; actual tax based on income brackets, top rate 9.85% |
| Mississippi | 5% | On winnings over $600 |
| Missouri | 4% | State tax withholding on prizes over $5,000; actual tax based on income |
| Montana | 5.9% | Taxed at state income tax rates |
| Nebraska | 5% | State tax withholding on prizes over $5,000; actual tax based on income brackets, top rate 5.84% |
| Nevada | No state lottery | |
| New Hampshire | 0% | No tax on lottery winnings |
| New Jersey | 10.75% | Taxed at graduated rates; 10.75% on winnings over $1 million |
| New Mexico | 6% | State tax withholding on prizes over $5,000; actual tax based on income brackets |
| New York | 10.9% | Plus additional local taxes in NYC and Yonkers |
| North Carolina | 4.50% | Flat rate |
| North Dakota | 2.5% | Taxed at state income tax rates |
| Ohio | 3.75% | Taxed at state income tax rates; specific withholding may apply |
| Oklahoma | 4.75% | Taxed at state income tax rates |
| Oregon | 8% | On prizes over $1,500 |
| Pennsylvania | 3.07% | Flat rate |
| Rhode Island | 5.99% | State tax withholding on prizes over $5,000; actual tax based on income brackets |
| South Carolina | 6.4% | Flat rate |
| South Dakota | 0% | No state income tax on lottery winnings |
| Tennessee | 0% | No state income tax on lottery winnings |
| Texas | 0% | No state income tax on lottery winnings |
| Utah | No state lottery | |
| Vermont | 6% | State tax withholding on prizes over $5,000; actual tax based on income brackets |
| Virginia | 4% | State tax withholding on prizes over $5,000; actual tax based on income brackets |
| Washington | 0% | No state income tax on lottery winnings |
| West Virginia | 6.5% | State tax withholding on prizes over $5,000; actual tax based on income brackets |
| Wisconsin | 7.65% | State tax withholding on prizes over $5,000; actual tax based on income brackets |
| Wyoming | 0% | No state income tax on lottery winnings |
Source: https://taxfoundation.org/data/all/state/vaccine-lottery-winnings-tax
Disclaimer: State tax laws and rates are subject to change. This list is for informational purposes based on data available in early 2025. Always consult the official Department of Revenue or Lottery Commission for the state where the ticket was purchased and seek advice from a qualified tax professional regarding your specific situation.
Can you deduct lottery losses from your taxes?
Players can indeed deduct lottery losses on their taxes, but only up to the amount of their total winnings for the year. Additionally, players must itemize deductions to claim any losses, requiring meticulous records of both wins and losses, including receipts, tickets, or any other pertinent documentation. This documentation should detail the dates and types of lotteries, the names and locations of the purchases, and the amounts won or lost.
The ability to deduct losses can provide some financial relief to players who have experienced significant losses. However, the benefits of this deduction are limited to the extent of winnings, and the requirement to itemize deductions may not be advantageous for all players depending on their overall tax situation.
Planning for tax season if you win the lottery
Winning the lottery is an exciting event, but it's essential to plan for the tax implications. Here’s how players can navigate the financial implications of winning the lottery as they approach tax season:
- Understand the Tax Rates: Federal taxes on lottery winnings can reach up to 37%, with state taxes varying. Familiarize yourself with these rates to anticipate your liabilities.
- Consult Professionals: Engage a tax professional or financial advisor who specializes in large financial windfalls to navigate the complexities of lottery taxation.
- Choose Your Payout: Decide between lump sum and annuity payments, each with distinct tax implications. A lump sum offers immediate access but potentially higher taxes, while annuities spread out the tax burden.
- Plan for State Taxes: Be aware of your state's taxation on lottery winnings, as rates and regulations differ widely across the US.
- Maintain Financial Discipline: Despite the windfall, adhere to a budget and financial plan to ensure long-term stability and enjoyment of your winnings.
- Keeping track of lottery winnings: It is important to maintain good records. Many individuals don't save their lottery tickets, including winning ones. Ordering tickets online proves convenient, as it allows you to access all your ticket orders in the Order section of the app at any time.
Please remember that these suggestions are not exhaustive. For additional information, refer to the IRS website.
Jackpot.com does not offer tax, legal, or accounting advice. This content is solely for informational purposes and should not be considered as a substitute for professional tax, legal, or accounting advice. It is recommended that you consult with your tax, legal, and accounting advisors regarding your federal and state tax obligations.
Frequently Asked Questions About Lottery Taxes
1. What is the federal tax rate on lottery winnings?
There isn't one single federal tax rate for all lottery winnings. First, for winnings over $5,000, the lottery payer is generally required to withhold 24% of federal taxes upfront. However, this 24% is just a down payment. Your actual federal tax rate depends on your total taxable income for the year (including the winnings). Lottery winnings are treated as ordinary income and can push you into higher federal income tax brackets, potentially up to the top rate (currently 37%). You'll calculate the final amount owed when you file your tax return.
2. Do I have to pay taxes on small lottery winnings (under $600)?
Technically, yes. All gambling winnings, regardless of the amount, are considered taxable income by the IRS and should be reported on your tax return. While the lottery organization typically only issues a Form W-2G for winnings of $600 or more (if the payout is at least 300 times the wager), you are legally required to report all income, even smaller amounts not reported on a W-2G.
3. Which states do not tax lottery winnings?
Several states offer a significant tax advantage by not levying a state income tax on lottery winnings. As of early 2025, these typically include:
- States with no state income tax at all: Florida, New Hampshire (taxes only interest/dividends), South Dakota, Tennessee, Texas, Washington, and Wyoming.
- States that specifically exempt state lottery winnings: California (exempts state lottery prizes like SuperLotto Plus, but not multi-state games), Delaware.
- States with no state lottery: Alabama, Alaska, Hawaii, Nevada, and Utah. Always verify with the specific state's current laws, as regulations can change.
4. Do I get a tax form for lottery winnings?
Yes, for larger winnings. If you win $600 or more (and the payout is at least 300 times your wager), the lottery organization is generally required to send you and the IRS a Form W-2G, Certain Gambling Winnings. This form details the amount you won and any federal or state taxes withheld. Even if you don't receive a W-2G (e.g., for winnings under $600), you are still responsible for reporting the income.
5. Are lottery winnings taxed differently if won online vs. retail?
No, the method of purchasing the ticket (online through an app like Jackpot.com or physically at a retailer) does not change how the winnings are taxed. The IRS considers lottery winnings taxable income regardless of how the ticket was acquired. The key factors remain the amount won and the applicable federal, state, and local tax laws. (Ordering online may offer easier record-keeping for tracking wins and losses).
