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.

» MORE: See our picks for the year's best wealth managers

Lottery tax calculator

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

Should I take a lump sum payment or annuity payments?

You may be able to take all the money right away or receive it in payments stretched out over many years (typically 29).

• If you take the lump sum payment, you get a giant pile of cash all at once. The amount is typically much smaller than the actual jackpot, but since the money is in your hands right away, you control what to do with it — including how and where to invest the money. Do that poorly, and you may end up with less money over the long run than you could have had by taking the annuity.

• If you take the annuity, 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. However, the payments may not be as big as you’d prefer and you may not live long enough to enjoy all the payments.

» MORE: How to choose a financial advisor

How much are taxes on lottery winnings?

Lottery winnings are taxed as ordinary income, which means that the amount of tax you pay depends on which tax bracket you're in, which tax-filing status you use, where you live and how much other income you have, as well as whether you're subject to alternative minimum tax.

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 progressive, which means different parts of your income are taxed at different rates.

• For example, if you're a single filer whose combined lottery winnings and annual salary equal $80,000 in taxable income after deductions, in 2026, you would pay 10% on the amount up to $12,400, 12% on the amount from $12,401 to $50,400, and 22% on the rest.

• If you already have a high taxable income, a large lottery win could push you into the highest tax bracket (37%) — but remember, the nature of the progressive tax system means you won't be paying that higher tax rate on everything.

The tax brackets for single filers and joint filers are below. If you use a different tax-filing status (head of household or married filing separately), check out our full list of tax brackets.

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

That depends on your tax bracket, filing status and where you live, as well as whether you take the lump sum or annuity, among other things.

Federal taxes

The IRS requires lottery agencies to withhold 24% on winnings over $5,000. This may cover all or just some of the actual amount of tax you may owe on the prize. 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.

State and local taxes

Some states also require lottery agencies to 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]

» 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 tax lottery winnings. The amount the lottery commission must withhold and how the winnings are taxed depend on your state’s tax rate(s) and rules.

• Only a few states — California, Florida, Nevada, Alaska, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — do not impose a state tax on lottery winnings.

• 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, 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.

» MORE: How to find a CPA or tax accountant near you

Taxes on annuity payments vs. a lump sum

If you take the lump sum, you may face a higher tax rate than if you take the annuity. 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 taxable earnings that year would go from $80,000 to $1.08 million. This moves you from the 22% federal tax bracket to the 37% federal tax bracket.

• 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 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, find a qualified financial advisor who can help you make the most of your winnings and help you set yourself up for long-term financial success.

» MORE: Search here for a financial advisor who can help plan retirement

A previous version of this article misstated that the lottery tax calculator would help calculate taxes owed, rather than withheld, on winnings. This article has been corrected.