How much tax do you pay on lottery winnings?
Lottery winnings are taxed as ordinary income, at the same federal rates as wages, from 10% to 37%. A large prize is taxed mostly at the top rate: in 2026, 37% applies to taxable income over $640,600 for a single filer. A $1,000,000 prize with no other income carries about $320,000 of federal tax — an effective rate of about 32%. State tax, if any, comes on top. The lottery tax calculator works out both for any prize, and lottery winnings after taxes by amount lists the take-home for common prizes and jackpots.
Federal tax on lottery winnings
When you claim a prize worth more than $5,000 after subtracting the ticket price, the lottery withholds 24% for federal income tax (IRS Instructions for Form W-2G). Withholding is a prepayment, not the final tax. For the current $674 Million Powerball jackpot taken as cash, $68,136,000 is withheld, but the estimated federal tax is $104,993,000 — about $36,857,000 more is due when you file.
The 2026 federal brackets and standard deduction come from IRS Rev. Proc. 2025-32. Smaller prizes can land in a lower bracket: a $10,000 prize for someone already earning $60,000 adds about $1,550 of federal tax.
If you also have losing lottery tickets, casino wagers or sports bets, winnings and losses are reported separately. The gambling tax calculator shows how itemizing and the 2026 90% loss deduction limit affect your federal tax.
State tax on lottery winnings
Most states tax lottery winnings as income. Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming do not, and California exempts California Lottery prizes, including Powerball and Mega Millions. Top state rates in 2026 range up to 10.9% in New York, and New York City adds up to 3.876%. States also withhold when you claim, at rates that are not always the same as the tax you finally owe. Every state is compared in lottery tax by state.
Lump sum or annuity: how the taxes differ
A lump sum is taxed in full in the year you claim it. Annuity payments are taxed as they arrive, one year at a time. For a jackpot, most of each annual payment is still taxed at the top rate, so the annuity's main tax difference is timing, not a lower rate. See the year-by-year tax on each payment in the lottery annuity calculator.
Check a smaller prize against your existing income
A single filer with $60,000 of other income has $43,900 of taxable income after the $16,100 standard deduction. Adding a $10,000 prize fills the remaining $6,500 of the 12% bracket and puts $3,500 in the 22% bracket: $780 + $770 = $1,550 of additional federal tax. This is why applying 24% withholding or a single top rate to every prize gives the wrong final result. Recalculate a larger prize bracket by bracket.
Sharing a prize
When several people share a winning ticket, such as an office pool, the lottery can issue a separate Form W-2G to each person for their share using Form 5754, so each pays tax on their own portion (IRS Instructions for Forms W-2G and 5754). Enter your share under “More options” in any calculator. The lottery pool agreement guide includes a fillable PDF and explains how to document each member's ownership.
Common questions
What is the tax rate on lottery winnings?
Federal rates run from 10% to 37%, the same as on wages; large prizes are taxed mostly at 37%. The lottery withholds 24% when you claim a prize over $5,000. State rates add 0% to about 11%, depending on where you live.
Are lottery winnings taxed as ordinary income?
Yes. Lottery and other gambling winnings are taxed as ordinary income, not as capital gains, and are added to your other income for the year. Only the portion of taxable income above a bracket threshold is taxed at the higher rate; lower slices keep their lower rates.
Do you pay taxes on small lottery prizes?
Yes. All lottery winnings are taxable income, even when nothing is withheld and no tax form is issued. Federal withholding applies only when a prize exceeds $5,000 after subtracting the ticket price, but smaller prizes still belong on your return.
Why is the tax bill higher than the amount withheld?
The lottery withholds a flat 24% for federal tax, but a large prize is taxed at rates up to 37%. The difference, plus any state tax not fully withheld, is due when you file your return for the year you claimed the prize.