Lottery winnings are taxed as ordinary income. The lottery withholds 24% federally up front on prizes over $5,000, but the top federal rate is 37% — so you usually owe more at tax time. On top of that, state tax runs from 0% to about 10.9%, depending on where you live and bought the ticket.
Federal tax: 24% now, up to 37% in total
Two different numbers trip people up. The 24% is mandatory federal withholding — the amount the lottery holds back before it ever hands you a check on any prize above $5,000. That is not your final bill. A jackpot-sized prize lands you in the top federal income-tax bracket of 37%, so when you file, you typically owe the roughly 13-point difference between what was withheld and what you actually owe. Plan for the full 37%, not the 24% you saw withheld.
State tax: 0% to ~10.9%
State treatment varies widely. Nine states levy no income tax at all, so they take nothing from your winnings, and a couple of income-tax states specifically exempt state-lottery prizes. At the other end, a handful of states take close to 11%. Representative examples:
| State | State tax on lottery winnings |
|---|---|
| Texas, Florida, Washington, Tennessee, South Dakota, Wyoming | 0% (no state income tax) |
| California, Delaware | 0% (state-lottery prizes exempt) |
| Pennsylvania | ~3.07% |
| Arizona | ~2.5% |
| New Jersey | ~10.75% |
| New York | ~10.9% (plus city tax in NYC) |
Rates change and some states withhold differently for residents vs non-residents. For an exact, current estimate by state, use our lottery tax & payout calculator.
A worked example
Say you win a $1,000,000 prize and take it as cash in a state with no lottery tax:
| Item | Amount |
|---|---|
| Prize | $1,000,000 |
| Federal withholding (24%) | −$240,000 |
| Additional federal owed at filing (to reach ~37%) | −$130,000 |
| State tax (0% example) | $0 |
| Approximate take-home | ~$630,000 |
In a high-tax state, subtract another ~$100,000+. That is why NumbersIntel's expected-value math assumes roughly a 63% after-tax take — it reflects this real-world bite.
Lump sum vs annuity and tax
Every payment is taxed as income in the year you receive it. The lump sum is taxed all at once at the top rate; the annuity spreads income across 30 years, which can keep more of each payment below the very top bracket — but tax rates can change over three decades. We break the money side down in lump sum vs annuity.
This is general information, not tax advice. Lottery taxation depends on your full financial picture and current law — consult a qualified tax professional before making decisions about a large prize.
Estimate your real payout
Pick your state and prize and see the federal + state bite and your take-home — lump sum or annuity.