Indiana lottery tax: a flat state rate and a county layer
Indiana taxes a lottery prize at a flat 2.95 % for 2026, and residents add the income tax of their county. Nonresidents pay the state part only.
- State rate 2026
- 2.95 %
- County tax
- by county of residence on Jan. 1
- Reverse credit with
- Arizona, Oregon
- Credit schedule
- IT-40 Schedule 6
Lump sum after all taxes
$331,136
33.8 % of the prize goes to tax: $168,864. $120,000 is withheld at the claim, the rest is due with the 2026 return.
| Prize this year | $500,000 |
| Federal income tax (top rate reached 35 %) | $154,114 |
| Indiana tax | $14,750 |
| Withheld when the prize is paid | $120,000 |
| Still to pay with the return | $48,864 |
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
Indiana's individual income tax is a flat 2.95 % of adjusted gross income for 2026, according to the Department of Revenue, and a lottery prize is part of that income with no special rate or exclusion. A resident who wins $75,000 owes $2,213 in state tax on it, plus $16,114 of federal tax at the 2026 brackets, before the county tax. Every Indiana county levies its own income tax on residents, set by the county of residence on January 1, and that layer is not included in the figures on this page because the rates were not part of the data checked for it. Nonresidents who win on a Hoosier Lottery ticket owe the state tax on the prize but no county tax: an Illinois resident with a $500,000 Indiana prize pays Indiana $14,750. The state withholding rate the Hoosier Lottery applies today is not stated in the official documents read. Arizona and Oregon prizes follow a reverse credit.
Indiana state tax on your prize (county tax not included)
Lump sum after all taxes
$56,674
| Prize this year | $75,000 |
| Federal income tax (top rate reached 24 %) | $16,114 |
| Indiana tax | $2,213 |
| Withheld when the prize is paid | $18,000 |
One rate for every dollar
Indiana does not use brackets. For 2026 the adjusted gross income tax rate for individuals is 2.95 %, as stated in the Department's Departmental Notice #1 (Departmental Notice #1), and the same figure appears in the casino withholding notice for 2026 (Departmental Notice #16). A prize of any size is multiplied by that rate once it is in income. There is no standard deduction at the state level, which is why a $75,000 prize costs almost exactly 2.95 % of itself: $2,213.
At the top of the scale nothing changes. A married couple in Carmel with $110,000 of salaries who takes a $2,000,000 lump sum owes Indiana $59,000, the same 2.95 %, while the federal tax on the same prize is $682,111 because federal brackets climb.
The county layer
Indiana's 92 counties each levy a local income tax on residents, with the county fixed by where the taxpayer lived on January 1 of the tax year; the rates are listed in Departmental Notice #1, which was revised effective October 1, 2026 (county rates in Departmental Notice #1). The county tax is reported on Schedule CT-40 of the IT-40, on the same income as the state tax, and W-2G forms may show county tax withheld. The calculator on this page leaves the county tax out, so for a resident the figures shown are lower than the final bill by the county rate times the prize.
Nonresidents are treated differently. The 2025 IT-40PNR booklet's example of a Michigan resident with riverboat casino winnings shows that gambling winnings of nonresidents are not subject to county tax (IT-40PNR booklet).
What the Hoosier Lottery withholds
Federal withholding is the usual 24 % on prizes over $5,000. For the state, the Hoosier Lottery's Winner's Guide describes state withholding on prizes over $1,200, but the percentage printed there is an older rate, not the 2026 one (Hoosier Lottery Winner's Guide). Neither the Lottery's claim pages nor the Department's notices read for this page state the current lottery withholding rate or whether county tax is withheld from a prize, so no withholding figure is shown here. Whatever the amount held at the claim, the final state and county tax is settled on the IT-40.
Buyers from Illinois, Michigan and Kentucky
Northwest Indiana sits in the Chicago area, and Michigan and Kentucky residents cross the border too. The IT-40PNR booklet lists lottery winnings among the Indiana-source income of nonresidents and says they are not covered by Indiana's reciprocal agreements, which only reach wages (IT-40PNR).
| Situation | Indiana | Home state | Kept |
|---|---|---|---|
| Illinois resident, Indiana ticket | $14,750 | $10,000 | $321,136 |
| Michigan resident, Indiana ticket | $14,750 | $6,500 | $324,636 |
| Indiana resident, Kentucky ticket | $0 | $17,395 | $328,491 |
| Indiana resident, Illinois ticket | $0 | $24,621 | $321,265 |
An Indiana resident who wins on a ticket from another state lists the prize on the IT-40 and takes the credit for taxes paid to other states on Schedule 6. The Group A worksheet limits it to the smaller of the other state's tax, the Indiana tax on that income and a cap based on the state rate; for gambling winnings where the other state requires no return, the W-2G withholding can serve as the tax paid. The credit for tax paid to another state explains the general mechanism.
Arizona and Oregon: the credit runs the other way
Indiana's booklet puts Arizona and Oregon in its Group C, a reverse credit: when an Indiana resident has income those states tax, Indiana gives no credit, and the resident claims the credit on the other state's nonresident return instead. The District of Columbia appears in the same group, for its unincorporated business tax only. For a lottery prize the arrangement only matters if Arizona taxes the nonresident in the first place, and the official Arizona texts read for this site do not say whether an Arizona Lottery prize is Arizona-source income for a nonresident. The Arizona Lottery does withhold 2.5 % for the state at the claim, without regard to residency. An Indiana resident in that position reports the prize to Indiana in full and settles the Arizona side on the Arizona return. Arizona lottery tax describes the other side of the arrangement.
Losses and old annuities
The 2025 Indiana booklets read for this page contain no deduction for gambling losses for residents, so a resident's prize is taxed in full even when losing tickets are itemized on the federal return. An Indiana deduction for lottery annuity payments exists, but only for Hoosier Lottery annuity prizes from drawings held before July 1, 2002; prizes from other states and later Hoosier prizes do not qualify.
These estimates use the 2026 state rate and the federal brackets, leave out county tax, and are not tax advice. If gambling is causing trouble, the National Problem Gambling Helpline is open around the clock at 1-800-MY-RESET (NCPG helpline).