How Lottery Taxes Work: Federal, State and Local

Lottery winnings count as taxable income, and the rules are easier to follow than they look. On prizes over $5,000, the lottery withholds 24% for federal tax. Think of that as a prepayment rather than your final bill: big winners can owe up to 37% on part of their prize. Most states tax winnings too, and a few cities and counties add their own tax.

Federal withholding

The IRS requires 24% federal withholding when your winnings minus the ticket price are more than $5,000. The 24% applies to the whole amount, not just the part over $5,000.

For example, a $10,000 prize on a $2 ticket counts as $9,998 in winnings. The lottery withholds 24% of that, or $2,399.52.

Two more rules worth knowing:

• No Social Security number: Winners who don’t give a taxpayer ID can face 24% backup withholding, even on smaller prizes. The Florida Lottery says it withholds 30% on all prizes when a winner has no valid Social Security number.
• Installments: Annuity payments are withheld at 24% if the total prize will be more than $5,000, even when a single payment is smaller.

Reporting: Form W-2G

Lotteries report larger prizes to the IRS on Form W-2G. Starting with payments made in 2026, the reporting threshold is $2,000, up from $600. The Florida Lottery, for example, reports all winnings of $2,000 and above. Hang on to your W-2G for tax time.

Federal tax brackets

Your winnings are added to your other income for the year. For 2026, federal rates run from 10% to 37%. The top 37% rate applies to taxable income over $640,600 for single filers, or $768,700 for married couples filing jointly.

Here’s why withholding often comes up short. Take a single filer with no other income who wins $1 million in cash. The lottery withholds $240,000. After the 2026 standard deduction of $16,100, the federal tax on the rest comes to about $320,000, which leaves roughly $80,000 more to pay at filing time. Your own numbers will differ, so plug them into our tax calculator.

IRS Publication 505 explains withholding and estimated tax payments, and a tax professional can help you plan for the difference.

State taxes

States handle lottery winnings in very different ways. Some examples:

• No state income tax: Florida, Texas and Washington don’t tax income, so their lotteries withhold only federal tax.
• California: The Franchise Tax Board says, “We do not tax winnings from the California Lottery, including SuperLotto, Powerball, and Mega Millions.” California does tax residents’ winnings from other states’ lotteries.
• Delaware: The Delaware Lottery says all winning Delaware Lottery tickets are subject to Delaware income tax. Its winner information mentions only federal withholding, so you settle the state tax when you file.
• New Jersey: New Jersey Lottery prizes of $10,000 or less are not taxed. Prizes over $10,000 are taxed in full. The lottery withholds 5% on prizes from $10,001 to $500,000 and 8% on larger prizes.
• Pennsylvania: Pennsylvania Lottery cash prizes have been taxable since 2016. The lottery withholds 3.07% on prizes over $5,000.
• New York: State rules require the lottery to withhold at the highest state tax rate on prizes over $5,000. That rate is 10.9% for 2026.
• Maryland: The lottery withholds 9.5% from residents and 8.75% from nonresidents on prizes over $5,000.

Where you live matters too. New Jersey and Pennsylvania both tax residents on lottery winnings from other states, and Pennsylvania also taxes nonresidents who win on tickets bought there. Our state pages have the details for your state.

Local taxes

A few places add a city or county tax:

• New York City: Residents pay city income tax on top of state tax. The top city rate for 2026 is 3.876%, and the lottery withholds at that rate for city residents. Yonkers residents pay a surcharge of 16.75% of their state tax.
• Maryland counties: Residents of every county and Baltimore City pay local income tax on winnings. For 2026, rates run from 2.25% to 3.30%. The lottery’s 9.5% resident withholding is meant to cover state and local tax together. Nonresidents pay a special 2.25% nonresident tax instead of a local tax.

Quick checklist for a big prize

• Plan for the full bill: Big prizes are often taxed above 24%.
• Compare payout options: Taxes apply to both cash and annuity prizes. Our lump sum vs. annuity guide explains the difference.
• Bring in a pro: A tax professional can walk through your numbers before you claim a large prize.

This guide is general information, not tax advice.