Taxes On Lottery Winnings By State 2020

There’s no doubt that winning the lottery is exciting and can significantly help the winner financially; however, the winner must not be too quick to spend all of his or her winnings. Like other income in the United States, the IRS taxes lottery winnings.

Lottery winnings are considered ordinary taxable income for both federal and state tax purposes. Winnings are taxed the same as wages or salaries are, and the total amount the winner receives must be reported on their tax return each year. Before the winner receives any of the money, however, the IRS automatically takes 24% of the winnings. The rest of the winnings are expected to be paid by the winner when filing the return.

What is the tax rate for lottery winnings? For federal taxes, lottery winnings are taxed according to the federal tax brackets. Federal tax brackets are progressive, so portions of the winnings are taxed at different rates, and could be as high as 37%. State income taxes vary by location. Some states do not have a state income tax, while others may withhold up to 8.82%.

The states that do not levy an individual income tax are:

Six states do not have a lottery: Alabama, Alaska, Hawaii, Mississippi, Nevada, and Utah. Two states, California and Delaware, do have a lottery but do not tax winnings.

If the winner buys a winning ticket in a state that they do not live in, most states will not withhold the winnings. Out of the 43 states that participate in multistate lotteries, only Arizona and Maryland tax the winnings of people who live out of state.

The ten states with the highest lottery withholding tax rates are:

  1. New York (8.82%)
  2. Maryland (8.75%)
  3. District of Columbia (8.50%)
  4. New Jersey (8.00%)
  5. Oregon (8.00%)
  6. Wisconsin (7.65%)
  7. Minnesota (7.25%)
  8. South Carolina (7.00%)
  9. Arkansas (7.00%)
  10. Connecticut (6.99%)

Below is a table with each state’s lottery tax withholding.

State Taxes on Lottery Winnings 2020 Pop.
Alabama0.00%4,908,621
Alaska0.00%734,002
California0.00%39,937,489
Delaware0.00%982,895
Florida0.00%21,992,985
Hawaii0.00%1,412,687
Mississippi0.00%2,989,260
Nevada0.00%3,139,658
New Hampshire0.00%1,371,246
South Dakota0.00%903,027
Tennessee0.00%6,897,576
Texas0.00%29,472,295
Utah0.00%3,282,115
Washington0.00%7,797,095
Wyoming0.00%567,025
North Dakota2.90%761,723
Pennsylvania3.07%12,820,878
Indiana3.23%6,745,354
Colorado4.00%5,845,526
Missouri4.00%6,169,270
Ohio4.00%11,747,694
Oklahoma4.00%3,954,821
Virginia4.00%8,626,207
Michigan4.25%10,045,029
Illinois4.95%12,659,682
Arizona5.00%7,378,494
Iowa5.00%3,179,849
Kansas5.00%2,910,357
Kentucky5.00%4,499,692
Louisiana5.00%4,645,184
Maine5.00%1,345,790
Massachusetts5.00%6,976,597
Nebraska5.00%1,952,570
North Carolina5.50%10,611,862
Georgia5.75%10,736,059
Rhode Island5.99%1,056,161
New Mexico6.00%2,096,640
Vermont6.00%628,061
West Virginia6.50%1,778,070
Montana6.90%1,086,759
Idaho6.92%1,826,156
Connecticut6.99%3,563,077
Arkansas7.00%3,038,999
South Carolina7.00%5,210,095
Minnesota7.25%5,700,671
Wisconsin7.65%5,851,754
New Jersey8.00%8,936,574
Oregon8.00%4,301,089
District of Columbia8.50%720,687
Maryland8.75%6,083,116
New York8.82%19,440,469