Lottery taxes by state 2026
Ten states take 0% of your lottery prize. Four take more than 10%. Where you live — and where you buy your ticket — can change your after-tax payout by hundreds of thousands of dollars on a large jackpot.
How federal tax works first
Regardless of which state you live in, the IRS withholds 24% of lottery winnings above $5,000 at the time of payment under IRC §3402(q).1 That withholding is just a prepayment. Large jackpots push virtually all of the prize into the 37% federal bracket (2026: ordinary income above $626,350 for a single filer or $751,600 for a married couple filing jointly).2 The 13-percentage-point gap between the 24% withholding and the 37% final rate must be reserved and paid when you file your return.
State tax is layered on top of that. Most states that tax lottery winnings withhold state tax at claim time and require reconciliation on the state return — the same mechanics as federal withholding.
State lottery tax rates — all 50 states + D.C.
Rates below reflect each state's top marginal income tax rate for 2026 as applied to lottery winnings. Large prizes push winners into the top bracket in every state, so the top marginal rate is the relevant number for jackpot planning.
| State | Rate | Notes |
|---|---|---|
| Hawaii | 11.0% | Does not participate in Powerball or Mega Millions |
| New York | 10.9% | NYC residents pay an additional city tax of up to 3.876%; Yonkers residents add 1.477% |
| New Jersey | 10.75% | Also withholds tax on nonresident NJ lottery winners |
| Washington D.C. | 10.75% | |
| Minnesota | 9.85% | |
| Oregon | 9.9% | |
| Vermont | 8.75% | |
| Maryland | 8.75% | State rate only; most counties add 2.25–3.2%, raising effective rate up to ~8.95% combined. Also withholds on nonresident winnings. |
| Wisconsin | 7.65% | |
| Maine | 7.15% | |
| Connecticut | 6.99% | |
| Montana | 6.75% | |
| Delaware | 6.6% | |
| South Carolina | 6.5% | |
| West Virginia | 6.5% | |
| Rhode Island | 5.99% | |
| New Mexico | 5.9% | |
| Nebraska | 5.84% | |
| Virginia | 5.75% | |
| Iowa | 5.7% | |
| Idaho | 5.7% | |
| Kansas | 5.7% | |
| Alabama | 5.0% | |
| Massachusetts | 5.0% | |
| Mississippi | 5.0% | |
| Georgia | 4.99% | |
| Illinois | 4.95% | |
| Missouri | 4.9% | |
| Oklahoma | 4.75% | |
| Utah | 4.65% | |
| Kentucky | 4.5% | |
| North Carolina | 4.5% | |
| Arkansas | 4.4% | |
| Colorado | 4.4% | |
| Louisiana | 4.25% | |
| Michigan | 4.25% | |
| Ohio | 3.5% | |
| Indiana | 3.15% | Flat rate |
| Pennsylvania | 3.07% | Flat rate |
| Arizona | 2.5% | Flat rate since 2023 |
| North Dakota | 2.5% | |
| Alaska | 0% | No state income tax |
| California | 0% | State income tax exists but lottery winnings are specifically exempt under California Government Code §8880.683 |
| Florida | 0% | No state income tax |
| Nevada | 0% | No state income tax |
| New Hampshire | 0% | No broad-based income tax |
| South Dakota | 0% | No state income tax |
| Tennessee | 0% | No state income tax |
| Texas | 0% | No state income tax |
| Washington | 0% | No state income tax |
| Wyoming | 0% | No state income tax |
Rates are 2026 top marginal state income tax rates. A large lottery prize pushes nearly all of the prize into the top bracket, so the top marginal rate is what applies. Local taxes (NYC, some Maryland counties) are additional. Verified against Tax Foundation 2026 state income tax tables and state lottery agency withholding schedules.
10 states with no lottery tax
If you live in one of these states, you owe zero state income tax on your lottery prize. You still owe federal tax at up to 37%, but your state keeps nothing.
| State | Reason |
|---|---|
| Alaska | No state income tax |
| California | Lottery winnings specifically exempt under Govt Code §8880.68 |
| Florida | No state income tax |
| Nevada | No state income tax |
| New Hampshire | No broad-based income tax (interest and dividends tax repealed 2025) |
| South Dakota | No state income tax |
| Tennessee | No state income tax |
| Texas | No state income tax |
| Washington | No state income tax |
| Wyoming | No state income tax |
California is the notable outlier. California has one of the highest state income tax rates in the country (13.3% top rate) but explicitly exempts lottery winnings from state income tax under Government Code §8880.68. A California resident who wins Powerball or Mega Millions pays 0% state tax — a major difference from a New York or New Jersey resident facing 10%+.
NYC and local city taxes
Several jurisdictions add a local income tax on top of the state rate. The most significant:
- New York City residents: NYC imposes a city income tax of up to 3.876% on top of the 10.9% state rate. A New York City resident claiming a large jackpot faces a combined state + city rate of approximately 14.8%.
- Yonkers, NY residents: Yonkers adds 1.477% city tax to the 10.9% NY state rate, for a combined rate around 12.4%.
- Maryland counties: Most Maryland counties add a local income tax of 2.25–3.2% on top of the 8.75% state rate. Baltimore City's rate (3.2%) is the highest, bringing total combined rates to approximately 8.95–11.95% for some residents.
If you live in or near a major city, check your municipality's current tax schedule — local rates can add meaningfully to the total burden.
Do you owe state tax where you bought the ticket or where you live?
Generally, you owe state income tax in the state where you live, not the state where you bought the ticket. If you're a Florida resident who wins a New York State lottery, New York may not be able to tax your prize (unless you also work or live in New York).
However, two states specifically withhold state tax on nonresidents' lottery winnings:
- Arizona: Withholds 6% on winnings paid to nonresidents (different from the 2.5% resident rate).
- Maryland: Withholds 8% on winnings paid to nonresidents.
If you win a multistate lottery prize (Powerball, Mega Millions) purchased in any state, the paying state's rules govern. Most states issue a W-2G for your winnings, which you report on your home state return at your home state's rate.
State tax on annuity payments vs. lump sum
If you take the annuity, each annual payment is taxed as ordinary income in the year you receive it. Most states withhold state tax from each annuity payment at claim time — the same mechanics as withholding from a paycheck. A winner who moves to a no-tax state after choosing the annuity may owe tax only to their new state going forward, though multistate tax rules are complex and depend on when and how the annuity was structured.
If you take the lump sum, the entire taxable amount is reported in the year of receipt. This means your full prize hits your state return as income in one year — pushing all of it into the top marginal bracket. There is no income-averaging available for lottery winnings under current federal or state law.
See the Lump Sum vs Annuity Guide for a full comparison including break-even analysis and investment return assumptions.
What the state rate means in dollars: a comparison
To make the state rate concrete, here is the state tax on a $100 million advertised jackpot with a cash option of approximately 60% ($60 million before tax):
| State | State rate | State tax on $60M cash option | Take-home after federal + state |
|---|---|---|---|
| California (exempt) | 0% | $0 | ~$37,800,000 |
| Texas (no income tax) | 0% | $0 | ~$37,800,000 |
| Pennsylvania | 3.07% | ~$1,842,000 | ~$35,958,000 |
| Arizona | 2.5% | ~$1,500,000 | ~$36,300,000 |
| Virginia | 5.75% | ~$3,450,000 | ~$34,350,000 |
| Connecticut | 6.99% | ~$4,194,000 | ~$33,606,000 |
| Maryland | 8.75% | ~$5,250,000 | ~$32,550,000 |
| Oregon | 9.9% | ~$5,940,000 | ~$31,860,000 |
| New Jersey | 10.75% | ~$6,450,000 | ~$31,350,000 |
| New York | 10.9% | ~$6,540,000 | ~$31,260,000 |
| New York City | 10.9% + 3.876% | ~$8,866,000 | ~$28,934,000 |
Federal tax estimated at 37% of the full cash option after the $626,350 bracket threshold. Actual take-home depends on itemized deductions, prior-year income, filing status, and other factors. Use the tax calculator for a personalized estimate.
State tax planning before you claim
State of residency at the time of claiming determines which state taxes apply. Some winners consider whether their state of residency could change before they claim — but this requires actually establishing domicile, not just spending time elsewhere. Courts and state tax authorities scrutinize residency changes around major income events, and a failed domicile argument can result in owing tax to both states plus penalties.
Legitimate pre-claim planning that doesn't require moving includes:
- Structuring a trust or LLC in your state before claiming, if your state allows it, to get privacy benefits.
- Modeling the annuity vs. lump sum decision with your actual state rate, since annuity payments spread income over 29 years.
- Reserving for state withholding if your state withholds at a rate below your marginal rate, since many states withhold at a standard rate that may be lower than the top bracket.
A fee-only financial advisor and CPA working together can model the full state + federal picture before you sign the claim paperwork. The Lottery Tax Planning Guide covers the full federal picture including estimated payment deadlines.
Get matched with a lottery-winner financial advisor
Tax planning is one of the first decisions a lottery winner needs to get right. Tell us where you are in the process — we'll match you with a fee-only advisor who understands state tax, claim structure, and sudden-wealth planning.
Sources
- IRS Topic 419, Gambling Income and Losses — lottery winnings are ordinary income; 24% withholding under IRC §3402(q) on prizes above $5,000 exceeding 300× wager.
- IRS Rev. Proc. 2025-32 — 2026 inflation-adjusted tax parameters: 37% top rate above $626,350 single / $751,600 MFJ; 35% rate on income above $250,525 / $501,050 MFJ.
- California Government Code §8880.68 — California lottery prizes are exempt from state personal income tax.
- Tax Foundation, State Individual Income Tax Rates and Brackets 2026 — top marginal rates and bracket thresholds for all 50 states and D.C.
- New York State Department of Taxation and Finance, Personal Income Tax Rates — NYS top rate 10.9%; NYC additional tax up to 3.876%; Yonkers 1.477%.
State tax rates verified against Tax Foundation 2026 state income tax tables and state lottery agency publications. Values current as of June 2026. State rates change periodically; verify your state's current rate before claiming.