New Jersey lottery tax: the prize test, the withholding and the credit
New Jersey looks at each NJ Lottery prize on its own: up to $10,000 it is exempt, above that the whole prize is taxed. A prize from another state is a different story.
- NJ Lottery prizes exempt
- $10,000 or less
- NJ Lottery withholding
- 5 %
- Top NJ rate
- 10.75 %
- Credit form
- Schedule NJ-COJ
State and local tax, ticket bought in New Jersey
$15,545
Bought at home in New York: $15,545. Difference: $0.
| Prize this year | $250,000 |
| Federal income tax (top rate reached 35 %) | $66,614 |
| New Jersey tax as a nonresident | $14,210 |
| New York tax before credit | $15,545 |
| Credit for the New Jersey tax | -$14,210 |
| Withheld when the prize is paid | $72,500 |
| Still to pay with the return | $9,660 |
| After all taxes | $167,840 |
New Jersey taxes nonresidents on prizes of its lottery over $10,000. New York credits the tax paid to New Jersey, up to its own tax on the prize.
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
New Jersey taxes a prize of the New Jersey Lottery only when that single prize is larger than $10,000; a prize of $10,000 or less, Powerball and Mega Millions tickets sold in New Jersey included, is exempt for residents and nonresidents alike. Above the line, the whole prize is income and the lottery withholds 5 % of it at the claim. A resident who wins $250,000 owes New Jersey $15,798 on it at the 2026 rates, on top of $66,614 of federal tax, and keeps $167,588. The top New Jersey rate, 10.75 %, applies to taxable income over $1,000,000. A lottery prize won in another state gets no threshold at all: it is taxable at any amount, and Schedule NJ-COJ credits the tax the other state took, up to the New Jersey tax on that income. A New Yorker who buys the winning ticket in New Jersey pays New Jersey $14,210 on the same $250,000.
A New Jersey ticket, a home in another state
State and local tax, ticket bought in New Jersey
$15,545
| Prize this year | $250,000 |
| Federal income tax (top rate reached 35 %) | $66,614 |
| New Jersey tax as a nonresident | $14,210 |
| New York tax before credit | $15,545 |
One prize, one test: the $10,000 line
The Division of Taxation states the rule in a single sentence: New Jersey Lottery winnings from prize amounts exceeding $10,000 are taxable, and the test applies prize by prize, not to the year's total (NJ Division of Taxation, Lottery and Gambling Winnings). Three prizes of $10,000 each in one year stay exempt. One prize of $10,001 is taxable in full, not just the part above the line. The same page applies the standard to residents and nonresidents, and multistate games count as New Jersey Lottery games when the ticket was sold in the state.
The exemption covers the New Jersey Lottery only. Casino wins in Atlantic City, racetrack payouts, sports bets and a lottery prize from any other state are gambling income from the first dollar. That asymmetry decides most of what follows.
What the lottery withholds
On a payout above $10,000, the New Jersey Lottery holds back 5 % of the entire prize for the state, beside the 24 % federal withholding that starts above $5,000. The Division's page also sets a higher state rate for the largest payouts and for a winner without a valid taxpayer identification number; our data set does not carry that tier, so this page gives no figure for it and the calculator applies 5 %. Casino, racetrack and sports betting payouts are withheld under a separate, lower rule described on the same page.
Withholding is a prepayment, not the tax. On $250,000 the lottery holds $12,500 for New Jersey against $15,798 actually owed, and $60,000 for the IRS against $66,614. The balance, $9,913, is settled with the returns. Withholding against the tax due runs the same comparison for any amount.
Brackets that climb fast
New Jersey has no standard deduction, and its brackets are not indexed: the Division still publishes the schedules labelled "2020 and after" (NJ tax rate schedules). A large prize therefore passes quickly through the middle rates into 8.97 % and then 10.75 %. The table shows how the effective state share grows with the prize.
| Winner | Prize | New Jersey tax | Federal tax | Kept |
|---|---|---|---|---|
| Single, other income $60,000 | $250,000 | $15,798 | $66,614 | $167,588 |
| Married couple, other income $140,000 | $2,000,000 | $190,248 | $688,911 | $1,120,842 |
| Single, Mega Millions cash value (October 20, 2026) | $170.3 million | $18,278,951 | $62,978,180 | $89,042,869 |
On the Mega Millions cash value, nearly every dollar is taxed at 10.75 %, which is why the New Jersey share, $18,278,951, is close to 10.7 % of the prize.
Buyers who cross the Hudson or the Delaware
Commuters from New York and Pennsylvania buy tickets in New Jersey every day. When one of them wins more than $10,000, the prize is New Jersey source income and the NJ-1040NR instructions place it on the nonresident return (NJ-1040NR instructions). The home state then taxes the same prize and decides whether to credit New Jersey's share.
| Home state, ticket state | Tax to the ticket state | Tax to the home state | Kept |
|---|---|---|---|
| New York, New Jersey ticket | $14,210 | $1,335 | $167,840 |
| Pennsylvania, New Jersey ticket | $14,210 | $0 | $169,175 |
| New Jersey, Pennsylvania ticket | $7,675 | $8,123 | $167,588 |
| New Jersey, New York ticket | $15,016 | $1,588 | $166,781 |
The last two lines are the reverse trip. A New Jersey resident who wins in Pennsylvania or New York owes New Jersey tax on the prize whatever its size, since the $10,000 exemption belongs to the New Jersey Lottery alone. Pennsylvania and New York each tax the nonresident first, under their own rules, and New Jersey then subtracts a credit.
Schedule NJ-COJ and its ceiling
The credit is claimed on Schedule NJ-COJ with the NJ-1040 (NJ-1040 instructions). It is the lesser of two amounts: the New Jersey tax attributable to the income taxed elsewhere, found by proportion, or the tax actually paid to the other jurisdiction. It is not a dollar for dollar refund of whatever the other state charged, and it never covers federal tax or tax paid to Puerto Rico or a foreign country. When the other state's rate is higher than New Jersey's effective rate on the prize, the excess stays lost. The credit for taxes paid to another state compares the forms of every state.
Losses and the annuity
New Jersey computes net gambling winnings itself rather than through federal Schedule A. Losses of the same year, losing lottery tickets included, can offset gambling winnings down to zero but not below, with records to prove them. That rule is New Jersey's own; the federal limit of 90 % that applies from 2026 is explained in the 90 % rule for gambling losses. Betting is entertainment with a cost; help is free and confidential at 1-800-MY-RESET.
A winner who takes the annuity and later leaves New Jersey still holds a New Jersey prize. The NJ-1040NR instructions treat New Jersey Lottery prizes over $10,000 as New Jersey source income for nonresidents; they do not mention installments expressly, so this page treats continued New Jersey tax on later payments as the reading of that rule, not as a quoted line. Moving after winning covers the other states.
These figures describe the 2026 rules applied to simple cases; they are an estimate, not tax advice for a particular return.