Tax on lottery winnings, explained straight
24% is withheld federally once winnings minus the wager exceed $5,000, but that withholding is not the final bill: a jackpot lands in the 37% top bracket. Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming and California (which specifically exempts lottery winnings) charge no state tax on it. This is not tax advice.
The withholding that happens first
24% is withheld federally above a set threshold, and it is only step one, not the final answer.
Win a real prize and the first number you meet is not a tax bill, it is a withholding rate. Federal law requires the payer to withhold 24% whenever withholding applies when winnings minus the wager exceed $5,000. Internal Revenue Service, 2026 That withholding happens automatically, before the winner sees the money, and it applies the same way whether the prize is a small scratch-off win or a nine-figure jackpot.
If the winner has not supplied a valid taxpayer ID number, the payer withholds the same 24% rate anyway, under backup withholding rules. 24% backup withholding applies instead if the winner does not provide a valid Taxpayer Identification Number (TIN). Internal Revenue Service, 2026
Why the number withheld is not the number owed
The 24% withheld at payout is only an upfront withholding, not the final tax bill. A jackpot-sized win puts the winner in the top federal income-tax bracket, currently 37% for 2026 (single filers with income over $640,600; $768,700 for married filing jointly), so most jackpot winners owe substantially more than the 24% withheld when they file. Internal Revenue Service, 2026
In plain terms: the amount withheld at the moment of payout is a deposit against taxes owed, not a settlement. Most jackpot-sized winners end up owing meaningfully more than that deposit once the full return is filed, because the win pushes their income into the top bracket for the year.
This is one of the most common misunderstandings around a big win: seeing 24% taken out and assuming that is the whole tax story. It is the floor, not the ceiling.
The bracket that actually applies
A jackpot-sized prize is large enough on its own to land squarely in the top federal income-tax bracket, which sits at 37% for 2026 for single filers with income over $640,600, and $768,700 for a married couple filing jointly. Internal Revenue Service, 2026 That is the bracket that applies to the top slice of income, not to every dollar, but for a win this size most of the prize sits inside it.
The number we are not going to guess at
Separate from the $5,000 withholding trigger above, payers must also issue a Form W-2G for reportable gambling winnings, and the IRS adjusts the specific dollar threshold for that reporting requirement every year. Separately from withholding, payers must issue Form W-2G for reportable winnings; the IRS inflation-adjusts the specific reporting-threshold dollar amount each year (Publication 1099 carries the current-year figure) — this is a distinct number from the $5,000 withholding trigger above. Internal Revenue Service, 2026
We were not able to independently confirm the exact 2026 figure for that reporting threshold, so we are not printing one here. Do not confuse it with the $5,000 withholding threshold above, which is verified and is a different number for a different purpose. Ask the payer or a tax professional for the current W-2G threshold that applies to your specific win.
States that leave lottery winnings alone
| Category | States |
|---|---|
| No state income tax at all | Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming |
| Taxes other income, but exempts lottery winnings specifically | California |
Seven states charge no state income tax on anything, which means lottery winnings are untouched at the state level too: Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. California is a separate case worth knowing by name: it does tax most other income, but it carries a specific exemption that leaves lottery winnings alone. Yahoo Finance, 2026
Alaska and Nevada also have no state income tax, but neither state runs Powerball/Mega Millions through a state lottery in the way this matters for winnings (a resident's home-state liability is moot; winnings from another state's lottery may still be taxed by that other state). Yahoo Finance, 2026
Everywhere else, and why it still needs a professional
Outside that list, state tax on lottery winnings is common, and rates vary widely from state to state. A winner who bought a ticket while traveling can also run into a second state's tax rules on top of their home state's, depending on where the ticket was purchased and where the winner lives. None of that is a reason to guess: a tax professional licensed in the relevant states is the right source for the actual number, not a general list like this one.
The federal side of the bill applies no matter which state issued the ticket, which is why the withholding and bracket numbers above are the same for every winner, and the state list above is the part that changes by geography.
It also matters whether the prize is taken as one lump sum or as 30 annual payments. Federal withholding is applied to each payment as it is made, so an annuity winner sees 24% withheld once a year, on that year's payment, rather than all at once on the full annuity total. A cash option winner sees the whole withholding happen in a single year, against a single, much larger number. Either way, the amount withheld is still only a deposit, and the actual liability is settled when a return is filed for each year money was received.
How this connects to the rest of a real win
Tax applies to a jackpot regardless of which payout option is chosen. Whether the prize is taken as a lump sum or as 30 annual payments changes when the tax is owed, not whether it is owed; the mechanics of the two options are on jackpot versus cash value.
Before a real win reaches a tax return, it has to be claimed correctly in the first place. What that process looks like, and why deadlines differ by state, is covered on claiming a prize.
Get a professional before you file
Everything above describes published federal rules and a published list of no-tax states. It is not a substitute for a licensed tax professional looking at an actual return, an actual state of residence, and an actual payout choice. Anyone with a real prize, of any size worth mentioning, should talk to one before assuming what they will keep.
Lottery taxes: common questions
How much tax is taken out immediately from a lottery win?
24% is withheld federally once winnings minus the wager pass $5,000. That is withholding on account, not the final tax bill.
Is 24% the total federal tax on a jackpot?
No. A jackpot-sized win is large enough to land in the 37% top federal bracket for 2026, so most winners owe substantially more than the 24% withheld once they file.
What is the W-2G reporting threshold for 2026?
We could not independently verify the exact current-year figure, so we are not stating one. It is a different number from the $5,000 withholding threshold, which is verified.
Which states do not tax lottery winnings?
Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no state income tax at all. California taxes other income but specifically exempts lottery winnings.
Does California really not tax lottery winnings?
Correct. California is unusual: it taxes most other income but carries a specific exemption for lottery winnings, so a California win is not touched at the state level.
What about Alaska and Nevada?
Both have no state income tax, but neither runs Powerball or Mega Millions through a state lottery in the way that matters here, so this point is largely moot for a resident of either state.
Does the payout choice change how much tax is owed?
It changes when the tax is owed, since a lump sum and 30 annual payments land in different tax years differently, but the same federal and state rules apply either way.
Is this page tax advice?
No. It describes published federal withholding rules and a published state list. A licensed tax professional should review any real win before a return is filed.
Keep reading
The odds do not move, so check them yourself
Powerball is 1 in 292,201,338 and Mega Millions is 1 in 290,472,336 for one play. Every figure on this site is dated, sourced and shown with its arithmetic, and we sell nothing that could change any of it.