Lottery tax withholding: what is held back and what is still owed
The check from the lottery is not the end of the tax. Here is what each lottery withholds and how far it falls short of the tax due.
- Federal withholding
- 24 %
- Above
- $5,000
- Foreign winners
- 30 %
Owed with the return on top of withholding
$119,332
Federal withholding is 24 % of a prize over $5,000; the federal tax actually due on this prize is $337,180 (33.7 %).
| Federal tax due | $337,180 |
| Federal withholding | $240,000 |
| State and city tax due | $94,651 |
| State withholding | $72,500 |
| Total withheld | $312,500 |
| Total tax | $431,832 |
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
When a lottery prize, minus the price of the ticket, exceeds $5,000, the lottery withholds 24 % of it for the IRS before paying, and 30 % for a foreign winner. That rate is a prepayment set by law, not the tax. The tax is computed with the 2026 brackets on all your income, and on a large prize it climbs toward 37 %. On a $1,000,000 prize, a single filer in Minnesota has $240,000 withheld but owes $337,180 of federal tax, so $97,180 remains due with the return. Most state lotteries withhold state tax as well, at rates that run from nothing in states without income tax to 10.90 % in New York. Minnesota withholds 7.25 %. A winner in Howard County, Maryland, has state tax withheld but also owes county tax, which brings the total still due on $1,000,000 to $93,609.
Withheld against owed
Owed with the return on top of withholding
$119,332
| Federal tax due | $337,180 |
| Federal withholding | $240,000 |
| State and city tax due | $94,651 |
| State withholding | $72,500 |
The federal rule
The Instructions for Forms W-2G and 5754 set the rule for state-conducted lotteries: federal income tax is withheld at 24 % when the winnings, reduced by the wager, are more than $5,000 (IRS, Instructions for Forms W-2G and 5754). The underlying law is section 3402(q) of the Internal Revenue Code (26 U.S.C. 3402). A winner who does not give a taxpayer identification number faces backup withholding instead. A foreign person who is not a US resident has 30 % withheld unless a treaty provides otherwise.
The rate never changes with the size of the prize, and that is the whole problem. A $10,000 prize won by someone in the 22 % bracket is over-withheld; a jackpot is heavily under-withheld.
| Prize | Federal withholding | Federal tax due | Still owed |
|---|---|---|---|
| $10,000 | $2,400 | $1,550 | -$850 |
| $100,000 | $24,000 | $22,114 | -$1,886 |
| $1,000,000 | $240,000 | $337,180 | $97,180 |
| $50,000,000 | $12,000,000 | $18,467,180 | $6,467,180 |
State withholding, lottery by lottery
Each state lottery withholds under its own state's rules, which are set by the state that sold the ticket, not by the state where you live. Some withhold the same rate from residents and nonresidents, others only from residents, others only above a threshold different from the federal $5,000. The table gives what the official pages read for this site say; "not stated" means the page read gives no rate, and the calculator then shows no state withholding.
| State that sold the ticket | Residents | Nonresidents | Threshold |
|---|---|---|---|
| Arizona | 2.50 % | 2.50 % | over $5,000 |
| Arkansas | 3.70 % | not stated | over $5,000 |
| California | none | none | |
| Colorado | 4.00 % | 4.00 % | over $5,000 |
| Connecticut | 6.99 % | 6.99 % | over $600 |
| Delaware | not stated | not stated | over $5,000 |
| District of Columbia | 8.50 % | none | over $5,000 |
| Florida | none | none | |
| Georgia | 4.99 % | 4.99 % | over $5,000 |
| Idaho | 5.30 % | 5.30 % | over $5,000 |
| Illinois | 4.95 % | 4.95 % | over $1,000 |
| Indiana | not stated | not stated | over $1,200 |
| Iowa | 3.80 % | 3.80 % | over $600 |
| Kansas | 5.00 % | 5.00 % | over $5,000 |
| Kentucky | 3.50 % | 3.50 % | over $5,000 |
| Louisiana | 3.00 % | 3.00 % | over $5,000 |
| Maine | 7.15 % | 7.15 % | over $5,000 |
| Maryland | 9.50 % | 8.75 % | over $5,000 |
| Massachusetts | 5.00 % | 5.00 % | over $600 |
| Michigan | not stated | not stated | |
| Minnesota | 7.25 % | 7.25 % | over $5,000 |
| Mississippi | not stated | not stated | over $600 |
| Missouri | 4.00 % | 4.00 % | over $600 |
| Montana | 5.90 % | 5.90 % | over $5,000 |
| Nebraska | 3.50 % | 3.50 % | over $5,000 |
| New Hampshire | none | none | |
| New Jersey | 5.00 % | 5.00 % | over $10,000 |
| New Mexico | 6.00 % | 6.00 % | over $5,000 |
| New York | 10.90 % | 10.90 % | over $5,000 |
| North Carolina | 3.99 % | 3.99 % | over $600 |
| North Dakota | 2.50 % | 2.50 % | over $5,000 |
| Ohio | 2.75 % | 2.75 % | |
| Oklahoma | not stated | not stated | |
| Oregon | 8.00 % | 8.00 % | over $1,500 |
| Pennsylvania | 3.07 % | 3.07 % | over $5,000 |
| Rhode Island | not stated | not stated | |
| South Carolina | 5.21 % | 5.21 % | over $500 |
| South Dakota | none | none | |
| Tennessee | none | none | |
| Texas | not stated | not stated | |
| Vermont | 6.00 % | 6.00 % | over $5,000 |
| Virginia | 4.00 % | 4.00 % | over $5,000 |
| Washington | none | none | |
| West Virginia | 4.58 % | 4.58 % | over $5,000 |
| Wisconsin | 7.65 % | 7.65 % | over $2,000 |
| Wyoming | none | none |
No rate could be read on an official page for Delaware, Indiana, Michigan, Mississippi, Oklahoma, Rhode Island. The withholding of these lotteries exists or not according to their own rules; the calculator leaves it out rather than guess.
Where the withholding shows on Form W-2G
The lottery reports what it withheld on Form W-2G, a copy of which the winner receives (Form W-2G). The federal income tax withheld has its own box near the top. The state part sits at the bottom: box 14 for the state winnings, box 15 for the state income tax withheld, box 16 for local winnings, box 17 for local income tax withheld and box 18 for the name of the locality (W-2G instructions, boxes 13 through 18). A winner who bought the ticket outside his home state finds the other state's code in box 13, which is the first sign that a nonresident return will be needed there. Keep every W-2G of the year together: each one is entered on the return, and the withholding it shows is credited only if it is reported.
Withholding on a prize shared by a group
When a group shares a winning ticket, the person who collects the prize gives the lottery Form 5754, and the lottery then prepares a separate W-2G, with its own withholding, for each winner listed (W-2G and 5754 instructions). Each member's withholding then follows his own share, which is how a lottery pool avoids putting the whole prize and the whole withholding on one person's return.
Why the gap matters
Withholding is credited on the return. If the total withheld falls short of the tax by more than the safe-harbor amounts, the IRS can charge an underpayment penalty, computed quarter by quarter. A jackpot winner who claims in March and waits until April of the next year to pay the balance has left a very large amount unpaid for several quarters. The usual answer is an estimated tax payment for the quarter of the claim, which the lottery does not make for you. The same logic applies to the state: Minnesota withholds 7.25 % on the $1,000,000 prize, while the Minnesota tax due on it is $94,651.
Two states, two withholdings
When the ticket was bought in another state, that state's lottery withholds at its nonresident rate where it has one, and your home state withholds nothing because it did not pay the prize. The withholding then goes to the wrong state from your point of view: you claim it back, or use it, on a nonresident return in the state of purchase, and pay your home state with your resident return, minus its credit. Tickets bought in another state walks through it.
Withholding on smaller prizes
Prizes of $5,000 or less have no federal withholding, but a Form W-2G is still issued from $2,000 when the prize is at least 300 times the ticket, and all of it is taxable. Scratch-off winnings tax covers those amounts. The calculator above works for any prize and any pair of states; it is an estimate, not tax advice. If playing has become a problem, 1-800-MY-RESET is free and confidential.