Lottery Taxes by State: What You Actually Take Home

Lottery winnings are taxable income. On prizes over $5,000 the IRS withholds 24% up front, but large jackpots are ultimately taxed at the top federal rate of 37%. On top of that, your state can take up to about 11% — though several states take nothing. So a headline jackpot is much bigger than what lands in your account. You can run your own numbers with the payout & tax calculator.

Federal tax

The 24% withholding is just a down payment. Because a jackpot pushes you into the highest federal bracket, the real federal bill on a big win is about 37% — you settle the difference at tax time. Smaller prizes (under $5,000) aren’t automatically withheld but are still taxable income you must report.

State tax

State treatment varies widely:

• No tax on winnings: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
• Highest rates: states like New York (about 10.9%, plus city tax in NYC), New Jersey, Oregon and Minnesota are at the top end.
• Most states fall somewhere between 3% and 6%.

Tax is generally owed to the state where you bought the ticket, which matters if you cross state lines to play.

Cash (lump sum) vs annuity

For the jackpot you choose how you’re paid:

• Lump sum (cash): a single payment of roughly half the advertised jackpot — that headline number is the annuity value, not the cash value.
• Annuity: the full advertised amount paid in about 30 graduated yearly payments.

Both are taxed. The lump sum gives you control and investment flexibility now; the annuity spreads income (and the tax hit) over decades. There’s no universally “right” answer — it depends on your plans.

A quick example

Say you win a $1,000,000 second-tier prize. At the 37% top federal rate you’d keep $630,000 in a no-tax state like Florida. In New York, after roughly 10.9% state tax on top, you’d keep closer to $521,000. Same prize, ~$109,000 difference — purely from where you live.

Frequently asked questions

How much tax do you pay on lottery winnings?

24% is withheld over $5,000, but large prizes are taxed at the 37% top federal rate, plus up to ~11% state. Several states tax nothing.

Which states have no tax on lottery winnings?

California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

Should you take the lump sum or the annuity?

The lump sum is about half the jackpot but paid now; the annuity is the full amount over ~30 years. Both are taxed — the right choice depends on your goals.

Estimates only — not tax advice. Rates change and local taxes may apply. Confirm with a qualified tax professional and the lottery operator.