Lottery Taxes by State: Federal & State Tax Guide (2026)

Lottery winnings are subject to both federal and state taxes. The IRS withholds 24% of any prize over $5,000, and the top federal rate of 37% applies to winnings above $640,600 for single filers in 2026. State taxes vary from 0% in California, Florida, and seven other states to over 10% in New York. Here is what you need to know about lottery taxes, including a complete 50-state tax rate table.

How Lottery Winnings Are Taxed

Lottery winnings are classified as ordinary income by the IRS and are taxed at your applicable federal and state income tax rates. The tax system works in two layers:

1. Federal taxes: The IRS automatically withholds 24% on lottery prizes over $5,000. Your actual tax liability depends on your total taxable income for the year, which determines your marginal tax bracket. Most large jackpot winners land in the top 37% bracket.
2. State taxes: State lottery tax rates vary from 0% to 10.9%. Some states have no income tax at all, California specifically exempts lottery winnings, and others tax lottery prizes at the standard state income tax rate.

The total effective tax rate on a large jackpot can reach 40% to 50% when combining federal and state taxes. This is one reason many winners choose the annuity payout option, which spreads the income across 30 years and may keep each year's payment in a lower tax bracket. For a detailed comparison, see our guide on lottery lump sum vs. annuity.

Federal Lottery Tax Rates (2026)

The IRS treats lottery winnings as ordinary income. Here are the key federal tax rules for lottery winners in 2026:

• Automatic withholding: The lottery commission withholds 24% of any prize over $5,000 before you receive your check. This is a withholding, not your final tax. Think of it as a prepayment toward your tax bill.
• Top marginal rate: 37% on taxable income above $640,600 (single) or $768,700 (married filing jointly), per IRS IR-2025-103. These rates were made permanent by the One Big Beautiful Bill Act.
• Standard deductions (2026): $15,350 (single), $30,700 (married filing jointly).

Virtually every jackpot winner lands in the top bracket for the year they receive the prize. If you win $10 million as a lump sum, the IRS withholds $2.4 million (24%). But your actual federal tax bill is approximately $3.7 million (37% on most of the income). You owe the difference when you file your return.

2026 Federal Tax Brackets (Single Filers)

Taxable Income	Tax Rate
$0 to $12,400	10%
$12,401 to $50,400	12%
$50,401 to $105,700	22%
$105,701 to $201,775	24%
$201,776 to $256,225	32%
$256,226 to $640,600	35%
Over $640,600	37%

State Lottery Tax Rates: All 50 States + DC

State lottery tax rates range from 0% to 10.9%. Nine states have no income tax, and California specifically exempts lottery winnings from state taxation. The following table shows the top state tax rate applied to lottery winnings in each state.

State	Tax Rate	Notes
Alabama	5.00%	No state lottery
Alaska	0%	No state income tax; no state lottery
Arizona	2.50%
Arkansas	4.40%
California	0%	Lottery exempt (Gov. Code 8880.68)
Colorado	4.40%
Connecticut	6.99%
Delaware	6.60%
District of Columbia	10.75%
Florida	0%	No state income tax
Georgia	5.49%
Hawaii	11.00%	No state lottery
Idaho	5.70%
Illinois	4.95%	Flat rate
Indiana	3.05%	Flat rate; county taxes may apply
Iowa	6.00%
Kansas	5.70%
Kentucky	4.00%	Flat rate
Louisiana	4.25%
Maine	7.15%
Maryland	5.75%	County taxes up to 3.2% may also apply
Massachusetts	5.00%	Flat rate
Michigan	4.25%	Flat rate; some cities levy additional tax
Minnesota	9.85%
Mississippi	5.00%
Missouri	4.80%
Montana	6.75%
Nebraska	6.64%
Nevada	0%	No state income tax; no state lottery
New Hampshire	0%	No state income tax on lottery winnings
New Jersey	10.75%
New Mexico	5.90%
New York	10.90%	NYC adds 3.876%; Yonkers adds 1.477%
North Carolina	4.50%	Flat rate
North Dakota	1.95%
Ohio	3.50%	Municipal taxes may also apply
Oklahoma	4.75%
Oregon	9.90%
Pennsylvania	3.07%	Flat rate; local taxes may apply
Rhode Island	5.99%
South Carolina	6.40%
South Dakota	0%	No state income tax
Tennessee	0%	No state income tax
Texas	0%	No state income tax
Utah	4.65%	Flat rate; no state lottery
Vermont	8.75%
Virginia	5.75%
Washington	0%	No state income tax
West Virginia	6.50%
Wisconsin	7.65%
Wyoming	0%	No state income tax

To calculate your after-tax lottery payout using these rates, try our lottery tax calculator, which applies both federal and state taxes to any prize amount.

States with No Lottery Tax

Lottery winners in 10 states pay zero state tax on their winnings:

No state income tax (9 states): Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. These states do not tax any income, including lottery prizes.

Lottery-specific exemption (1 state): California exempts lottery winnings from state income tax under Government Code 8880.68. California does have a state income tax (up to 13.3%), but lottery prizes are specifically excluded.

Important: "No state tax" does not mean "no tax." Federal taxes (up to 37%) still apply regardless of which state you live in.

Five states do not have a state lottery at all: Alabama, Alaska, Hawaii, Nevada, and Utah. If you live in one of these states and win a multi-state game like Powerball or Mega Millions by purchasing a ticket in another state, you may owe taxes in the state where you purchased the ticket. Consult a CPA for guidance on cross-state lottery taxation.

Lump Sum vs. Annuity: Tax Differences

The choice between a lump sum and annuity payout has significant tax implications:

Lump sum: The entire prize (minus the cash value discount) is taxed in a single year. For a large jackpot, this almost guarantees you pay the top 37% federal rate on the vast majority of the prize. Your effective tax rate is highest because the full amount stacks on top of any other income you earned that year.

Annuity: Payments are spread over 30 years (for Powerball and Mega Millions, 1 initial payment plus 29 annual payments, each increasing 5%). Each annual payment is taxed as ordinary income in the year you receive it. While large jackpot annuity payments still land in the top bracket, smaller prizes may benefit from lower brackets when spread over time.

Example: A $100 million Powerball jackpot pays approximately $56.2 million as a lump sum (before taxes) or approximately $3.33 million per year for 30 years (increasing 5% annually). The lump sum puts you in the 37% bracket immediately on the full amount. The annuity payments of $3.33 million per year also land in the 37% bracket, but future tax law changes could shift rates up or down over the 30-year period.

For a complete analysis of the financial trade-offs, see our guides on Powerball payouts and Mega Millions payouts. To see current jackpot amounts and estimated after-tax values, visit our live jackpot tracker.

How Selling Lottery Annuity Payments Is Taxed

When you sell lottery annuity payments to a purchasing company like CSF, the lump sum you receive is taxed as ordinary income in the year you receive it.

Key tax facts about selling lottery annuity payments:

• The sale proceeds are treated as ordinary income, not capital gains. Lottery payments have a zero cost basis (you won them), so the full sale amount is taxable.
• The buyer (CSF) does not withhold taxes from the payment. You are responsible for reporting the income on your tax return and paying any taxes owed.
• State taxes apply based on your state of residence at the time of the sale.
• Selling does not create any new tax obligation that would not exist if you received the payments over time. It simply accelerates the income into a single year.

CSF purchases lottery annuity payments in states that allow the sale under their lottery statutes. Not all states permit the assignment of lottery annuity payments. See our lottery winnings service page for more information on the process and which states allow sales.

Can You Reduce Your Lottery Tax Bill?

There are limited strategies to reduce the tax impact of lottery winnings, but none eliminate the obligation entirely:

• Charitable giving: Donating to qualified charities can offset some taxable income. The IRS allows charitable deductions up to 60% of adjusted gross income for cash donations to public charities under IRC section 170(b)(1)(A).
• Choosing the annuity: Spreading income over 30 years is itself a tax management strategy. While each annual payment may still land in the top bracket for large jackpots, it provides more time for tax planning each year.
• Trust structures: Some winners establish trusts for asset protection and privacy. A trust does not eliminate income taxes on lottery winnings, but it may help with estate planning and creditor protection. Trust rules for lottery winners vary by state.
• State residency: Moving to a no-income-tax state before claiming a prize may reduce state taxes. This strategy carries legal risks and varies by state. Some states tax based on where the ticket was purchased, not where you live when you claim.

CSF does not provide tax advice. Consult a qualified CPA or tax attorney for strategies specific to your situation and prize amount.

Frequently Asked Questions

How much tax do you pay on lottery winnings?

Lottery winnings are taxed as ordinary income. The IRS withholds 24% on prizes over $5,000, and the top federal rate is 37% on income above $640,600 (single filers, 2026). State taxes add 0% to 10.9% depending on where you live. Total effective tax rates on large jackpots typically reach 40% to 50%.

Which states have no lottery tax?

Nine states have no state income tax: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. California also exempts lottery winnings from state income tax under Government Code 8880.68. Federal taxes still apply in all states.

Do you pay taxes on lottery winnings every year?

If you chose the annuity option, yes. Each annual payment is taxed as ordinary income in the year you receive it. If you took the lump sum, the full amount is taxed in the year you receive it. Selling lottery annuity payments is also taxed as ordinary income in the year of the sale.

Is it better to take the lump sum or annuity for taxes?

The annuity spreads your tax liability over 30 years, which may result in a lower effective tax rate if future tax brackets remain similar. The lump sum concentrates all taxes in one year at the highest bracket. Taxes are only one factor in this decision. Investment returns, inflation, and personal financial needs also matter. Consult a financial advisor for guidance specific to your situation.

How are lottery winnings taxed in California?

California does not tax lottery winnings at the state level. Government Code 8880.68 exempts lottery prizes from state income tax. Federal taxes still apply. California lottery winners pay only federal income tax on their prizes.

Does the IRS take taxes out of lottery winnings automatically?

Yes. The IRS requires 24% federal withholding on lottery prizes exceeding $5,000. This is not your final tax bill; it is an advance payment. If your total income puts you in the 37% bracket, you will owe additional taxes when you file your annual return.

Can you sell lottery payments to avoid taxes?

No. Selling lottery annuity payments does not eliminate your tax obligation. The lump sum from the sale is taxed as ordinary income in the year you receive it. Selling may be beneficial for other financial reasons, such as paying off debt or investing. CSF purchases lottery annuity payments in states that allow the sale.

How much would you take home from a $1 million lottery win?

On a $1 million prize, the IRS withholds $240,000 (24%). Your final federal tax depends on your total income and filing status, but expect approximately $310,000 to $370,000 in federal taxes. State taxes add $0 to $109,000 depending on your state. After all taxes, a $1 million winner typically takes home $550,000 to $700,000.