Lottery Tax Calculator: What You Owe and How It Works
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If you win the lottery, you may want to hit pause before you buy a yacht. You will almost certainly owe taxes on those winnings, and planning for those taxes will save you a headache come tax time.
» Dive deeper: Learn how the lottery works.
How much are taxes on lottery winnings?
You don’t have to win the big jackpot to owe lottery taxes: The typical lottery tax is around 24% of winnings over $5,000, and is withheld by the lottery agencies. If your winnings push you into a higher tax bracket (a large prize may put you into the 37% bracket), you will probably have to pay additional taxes.
The calculator below will help you estimate how much tax you may owe on lottery winnings.
How do lottery taxes work?
Like your paycheck, the government considers lottery winnings a form of income. How much tax you’ll owe will depend on your existing income, and by extension, your federal tax bracket. It’s a good idea to check with a tax advisor to see how federal and state taxes might affect your lottery winnings.
» Learn more: How to find a CPA near you
See how the tax brackets of two of the most common filing statuses (single filers and those who are married filing jointly) and rates work below, based on filing status.
2023 tax brackets: single filers
2022 limits | 2023 limits | |
|---|---|---|
Employee contribution limit | $20,500. | $22,500. |
Catch-up contribution limit for individuals age 50 and older | $6,500. | $7,500. |
Maximum employee and employer contribution | Cannot exceed $61,000 or 100% of the employee's compensation, whichever is less. | Cannot exceed the lesser of $66,000 or 100% of employee compensation, whichever is less. |
2023 tax brackets: married, filing jointly
Tax rate | Taxable income bracket | Taxes owed |
|---|---|---|
10% | $0 to $22,000. | 10% of taxable income. |
12% | $22,001 to $89,450. | $2,200 plus 12% of the amount over $22,000. |
22% | $89,451 to $190,750. | $10,294 plus 22% of the amount over $89,450. |
24% | $190,751 to $364,200. | $32,580 plus 24% of the amount over $190,750. |
32% | $364,201 to $462,500. | $74,208 plus 32% of the amount over $364,200. |
35% | $462,501 to $693,750. | $105,664 plus 35% of the amount over $462,500. |
37% | $693,751 or more. | $186,601.50 + 37% of the amount over $693,750. |
If you have a different tax filing status, check out our full list of tax brackets.
Do I have to pay state tax on lottery winnings?
Thirty-six states charge a tax on lottery winnings, with an average lottery tax rate of 5.6%. The actual amount will depend on your state’s particular tax rate.
Some states, such as California, Delaware, Florida, South Dakota, Tennessee, Texas, Washington and Wyoming, do not tax lottery winnings.
If you bought your winning ticket in a state you don’t live in, it’s unlikely that you’ll have to pay state taxes for the state in which you purchased the ticket — unless you bought the ticket in Arizona and Maryland. Those two states are the only ones that tax lottery winners who live out of state.
If your state doesn’t have a lottery (Alabama, Alaska, Hawaii, Nevada and Utah), or you live in a state that doesn’t tax lottery winnings, you may not need to pay any state tax (unless you bought your ticket in Arizona or Maryland).
» Learn more: State income tax rates and how they work
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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 (typically 29) years. 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 the 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 — 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.
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 expert. These professionals may be able to help you make the most of your winnings and help you set yourself up for financial success long-term.
Some online financial advisors also have in-house tax experts that can work in tandem.
» Learn how to find the best tax pro near you
