Arizona lottery tax: a low flat rate and a credit that runs backwards
Arizona taxes all income at one rate, 2.5 %, and the Arizona Lottery withholds that same rate from any prize large enough for federal withholding.
- Arizona rate
- 2.5 %
- Lottery withholding
- 2.5 % over $5,000
- Reverse credit with
- California, Indiana, Oregon, Virginia
- Federal withholding
- 24 %
Lump sum after all taxes
$1,847,820
38.4 % of the prize goes to tax: $1,152,180. $795,000 is withheld at the claim, the rest is due with the 2026 return.
| Prize this year | $3,000,000 |
| Federal income tax (top rate reached 37 %) | $1,077,180 |
| Arizona tax | $75,000 |
| Withheld when the prize is paid | $795,000 |
| Still to pay with the return | $357,180 |
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
Arizona has taxed individual income at a single 2.5 % since tax year 2023, so a lottery prize won by an Arizona resident costs exactly that share in state tax: $75,000 on a $3,000,000 prize for a single filer, against $1,077,180 of federal tax, which leaves $1,847,820. A.R.S. 43-405 makes the Arizona Lottery withhold the highest Arizona rate, 2.5 %, from every prize payment subject to federal withholding, that is over $5,000, with no distinction by residence. Whether Arizona then taxes a nonresident on an Arizona Lottery prize is a point the official texts read for this site do not settle: the nonresident rules tax income from Arizona sources without naming lottery winnings, so the calculator adds no Arizona tax for a visitor. For Arizona residents who win elsewhere, Arizona's credit for tax paid to another state is withheld when that state credits Arizona instead; per their official texts, that is the case for California, Indiana, Oregon, Virginia. The old subtraction for Arizona Lottery winnings ended after 2018.
An Arizona prize after federal and Arizona tax
Lump sum after all taxes
$1,847,820
| Prize this year | $3,000,000 |
| Federal income tax (top rate reached 37 %) | $1,077,180 |
| Arizona tax | $75,000 |
| Withheld when the prize is paid | $795,000 |
The rate and the withholding are the same number
Laws 2021, chapter 412 replaced the Arizona brackets with a flat rate that took full effect for tax year 2023 (SB 1828, amending A.R.S. 43-1011). It is 2.5 % of taxable income, the same for single filers and couples. For a resident whose wages already cover the standard deduction, a prize adds exactly 2.5 % of itself to the Arizona bill. The federal tax is a different story: the 2026 brackets climb to 37 %, and on $3,000,000 the federal share is $1,077,180, about 35.9 % of the prize.
A.R.S. 43-405 ties the lottery withholding to the top Arizona rate and to the federal trigger: every payment of prize winnings that is subject to federal withholding has Arizona tax withheld too (A.R.S. 43-405). For a lottery prize that means anything over $5,000. Because the rate is flat and equal to the withholding, the state account of an Arizona resident is settled at the claim; the federal account is not, and $357,180 remains due in April on the example. The statute draws no line between residents and nonresidents, so a visitor who claims an Arizona prize sees the same 2.5 % taken.
Visitors from California, Nevada and Utah
Here the official texts run out. A.R.S. 43-1091 defines a nonresident's Arizona income as the part of federal adjusted gross income from Arizona sources, and the 2025 Form 140NR instructions list wages, rents, business income, Arizona real estate and "any other income from an Arizona source" (A.R.S. 43-1091; Form 140NR instructions). Neither names lottery or gambling winnings, and the department's own pages could not be read. This page therefore does not state that Arizona taxes a nonresident on an Arizona Lottery prize, and the calculator does not add that tax. What is certain is the withholding at the claim and the home state's own claim on the prize.
| Visitor holding an Arizona ticket | Arizona tax added here | Home state tax | Kept after all tax |
|---|---|---|---|
| California resident | $0 | $375,633 | $1,547,187 |
| Utah resident | $0 | $133,500 | $1,789,320 |
| Nevada resident | $0 | $0 | $1,922,820 |
California taxes its residents on a lottery prize from any other state, even though it exempts its own lottery. Utah has no lottery of its own and taxes the prize at its flat rate. Nevada has no personal income tax, so the Nevada visitor's only state cost is the open Arizona question. If Arizona tax does apply to a Californian, A.R.S. 43-1096 gives the Californian a nonresident credit for the California tax, because California gives no Schedule S credit for Arizona (A.R.S. 43-1096; FTB Schedule S instructions). The California page follows that case from Sacramento's side.
A credit that runs backwards with 4 states
An Arizona resident who wins in another state normally gets a credit under A.R.S. 43-1071 for the tax paid there, capped at the share of Arizona tax that the doubly taxed income bears (A.R.S. 43-1071). The statute refuses that credit when the other state already gives Arizona residents a credit for Arizona tax. Reading the other states' official texts, California, Indiana, Oregon, Virginia do exactly that on their nonresident returns. The Arizonan then pays Arizona in full and asks the other state to reduce its own tax.
| Arizona resident, ticket from | Tax to that state | Arizona tax | All state tax | Who gives the credit |
|---|---|---|---|---|
| California | $0 | $75,000 | $75,000 | No California tax on the prize |
| Oregon | $219,996 | $75,000 | $294,996 | Oregon, on its nonresident return |
| Virginia | $96,702 | $75,000 | $171,702 | Virginia, on its nonresident return |
| Colorado | $132,000 | $0 | $132,000 | Arizona, under 43-1071 |
The bottom line is the same as with a normal credit, the higher of the two state taxes, but the paperwork and the cash flow differ: the Oregon or Virginia withholding has to be recovered from that state, not offset on the Arizona return. California does not tax a nonresident on a California Lottery prize, so an Arizonan who wins there pays Arizona alone. The credit for taxes paid to another state lists the reverse-credit pairs nationwide.
The subtraction that no longer exists
Until 2018 Arizona let residents subtract part of their Arizona Lottery winnings. The subtraction was repealed for tax years beginning after December 31, 2018, and A.R.S. 43-1022 no longer lists it (A.R.S. 43-1022). Older articles still mention it; for a 2026 prize it is gone.
Gambling losses
Arizona itemized deductions are those allowed by the Internal Revenue Code parts that include section 165(d), so wagering losses are deductible on the Arizona return to the same extent as federally, for a filer who itemizes (A.R.S. 43-1042). The federal limit to 90 % of losses from 2026 comes from Public Law 119-21; whether Arizona's conformity date carries that limit into the 2026 Arizona return is not stated in the texts read. The 2026 loss limit has the federal detail. Free and confidential help for gambling problems: 1-800-MY-RESET.
Moving away with an Arizona annuity
No official Arizona text read for this site says whether annual installments of an Arizona Lottery prize stay taxable in Arizona after the winner moves to another state. Given the open question on nonresidents in general, this page draws no conclusion; moving after winning the lottery sets out the states whose rules are written down. Everything here is an estimate on the 2026 rules as read, not tax advice for a specific claim.