Lottery Tax Calculator: How Taxes on Winnings Work

Winning the lottery can be a life-changing affair. A sudden windfall could help you jumpstart a number of financial and personal goals, from paying off debt to upping your investing or retirement savings game.

If you're lucky enough to hit it big, celebrations are certainly in order. But don't forget to consider the fine print: The IRS and most state governments will want a piece of the action — how big of a piece depends on the size of your prize.

Here's what to know about how taxes work on lottery winnings and how to plan ahead.

How do lottery taxes work?

The money you win from the lottery is considered taxable income by federal and most state tax authorities. The lottery agency is required to take out a certain amount for taxes before the money is even given to you, but this often doesn't cover the entire tax bill. When you file your annual return, you'll need to report how much you won and square up with the IRS on any remaining taxes.

How much is my take-home lottery prize after taxes?

Lottery agencies immediately withhold 24% on winnings over $5,000, which could help offset some of the tax burden you may face when it's time to file your return. For example, on a $10,000 prize, $2,400 will be immediately withheld for federal taxes, leaving you with a take-home amount of $7,600.

Some states also withhold state taxes on your winnings. For example, in New York, the state gaming commission is required to withhold 10.9% of New York State taxes in addition to the federal amount^[0]

How much are taxes on lottery winnings?

If your prize is big enough, it can inflate your income, which can have a big effect on how much you may owe. However, the good news is that even if you win big, your entire income won't be taxed at the same rate. In the U.S., the federal tax system is tiered, which means different parts of your income are taxed at different rates.

For example, let's say you're a single filer whose combined lottery winnings and annual salary equal $80,000 in taxable income after deductions. For tax year 2025, you would pay 10% on the amount up to $11,925, 12% on the amount from $11,926 to $48,475, and 22% on the rest. If you already have a high taxable income, a large lottery win can push part of it into the highest tax bracket of 37% — but remember, you won't be paying that rate on everything.

See the tax brackets and rates of the most common filing statuses (single filers and those who are married filing jointly) below. If you have a different tax filing status, check out our full list of tax brackets.

Lottery tax calculator

Enter the amount won to estimate how much federal tax may be immediately withheld on your winnings.

» Ready to see the whole picture? Check out NerdWallet's income tax calculator

Do I have to pay state taxes on lottery winnings?

Most states charge a tax on lottery winnings. The amount initially withheld and how the winnings get taxed depend on your state’s tax rate(s) and system.

Only a few states — California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — do not impose a state tax on lottery winnings. Keep in mind that although living in these states may allow you to shelter your winnings from state tax, federal withholding and taxes will still apply.

If you live in a state that doesn’t have a lottery (Alabama, Alaska, Hawaii, Nevada and Utah) or purchased your winning ticket in a state you don’t live in, the state where you purchased your ticket may withhold state taxes on your winnings, and you’ll need to figure out how much you owe to your state at tax time.

» Learn more: State income tax rates and how they work

Should I take a lump sum payment or annuity payments?

You may have a choice as to how you receive the money: You may be able to take all the money right away or receive it in payments stretched out over many years (typically 29). Whatever you decide, you still have to pay taxes on your lottery winnings.

If you choose to receive the lump sum payment, you actually end up getting less money over the long haul. That’s because the total amount of the lottery prize is calculated based on the winner choosing the annuity payment plan. The base amount is invested for you, and you earn interest on it for 29 years after you win the prize.

There also may be some tax advantages to taking the annuity payments since your taxes are deferred until you actually get the payments (more on this below). Plus, it’s harder to spend all the money at once if you’re getting payments for nearly 30 years.

The obvious advantage of taking a lump sum is that you’re handed a giant pile of cash all at once. Another consideration is that since the money is in your hands right away, you get more control over what to do with it — including how and where to invest your winnings if you choose to do so.

Taxes on annuity payments vs. a lump sum

When you choose to cash out your winnings in a lump sum, you may face a higher tax rate than if you were to take the annuity route. For example, let's say you're a single filer who makes $80,000 at your job, and you win $1 million in the lottery. Generally, here's how your winnings might be taxed in each scenario.

• Lump sum: Your yearly earnings would be pushed from $80,000 to $1.08 million. This moves the highest tax rate you're subject to from 22% to 37%.

• Annuity payments: Because payments are generally spread out over 29 years and increase by 5% each year, your first payment would be around $16,000, keeping you in the same 22% bracket. This allows you to spread out the tax burden over a number of years. The catch? Because annuity payments increase each year, your last payment may be about $63,000.

How do I deal with lottery taxes?

If you’ve come into a lot of money from winning the lottery, it may be worth investing in a financial planner and a tax advisor. These professionals may be able to help you make the most of your winnings and help you set yourself up for long-term financial success.

Some online financial advisors also have in-house tax experts who can work in tandem.

» Learn how to find the best tax pro near you