North Carolina lottery tax: a low flat rate that starts early
North Carolina's rate fell to 3.99 % in 2026, and the Education Lottery withholds that rate from prizes as small as $600.
- NC rate 2026
- 3.99 %
- Lottery withholding
- 3.99 % from $600
- Gambling losses
- No NC deduction
- Credit form
- D-400TC, Part 1
State and local tax, ticket bought in North Carolina
$23,940
Bought at home in Virginia: $14,375. Difference: $9,565.
| Prize this year | $250,000 |
| Federal income tax (top rate reached 35 %) | $66,614 |
| North Carolina tax as a nonresident | $9,565 |
| Virginia tax | $14,375 |
| Withheld when the prize is paid | $69,975 |
| Still to pay with the return | $20,579 |
| After all taxes | $159,446 |
North Carolina taxes nonresidents on prizes of its lottery. Virginia gives no credit for another state's tax on lottery winnings.
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
North Carolina taxes lottery prizes as ordinary income at its flat 3.99 %, the rate for tax years after 2025, after a standard deduction of $12,750 for a single filer. The 2026 NC-30 withholding instructions require the North Carolina State Lottery Commission to withhold 3.99 % on winnings of $600 or more, so even a $2,500 scratch-off prize loses $100 at the claim, with no federal withholding until $5,000. A resident who wins $250,000 owes North Carolina $9,975 and keeps $173,411 after federal tax. Nonresidents owe North Carolina on gambling income earned in the state. For a Virginian who buys in North Carolina that is a real double tax: North Carolina takes $9,565 and Virginia, which gives no credit on lottery winnings, adds $14,375. North Carolina residents who win elsewhere claim Form D-400TC, and none of them can deduct gambling losses on the state return.
A North Carolina ticket and your home state
State and local tax, ticket bought in North Carolina
$23,940
| Prize this year | $250,000 |
| Federal income tax (top rate reached 35 %) | $66,614 |
| North Carolina tax as a nonresident | $9,565 |
| Virginia tax | $14,375 |
Withheld from the first $600
The NC-30 booklet for 2026, the Department of Revenue's withholding manual, lists lottery prizes among the payments subject to state withholding: winnings of $600 or more paid by the North Carolina State Lottery Commission are withheld at 3.99 % (NCDOR, NC-30 for 2026). The booklet draws no line between residents and nonresidents. The Education Lottery's own answers add that all prizes subject to withholding have both federal and state amounts taken out (NC Education Lottery FAQ).
The state threshold sits far below the federal one. A prize of $2,500 is withheld $100 for North Carolina and nothing for the IRS, yet it adds $300 to the federal bill. On $250,000, the state withholding of $9,975 matches the state tax for a winner whose other income already covers the standard deduction, while the federal withholding of $60,000 falls short of the $66,614 owed. Withholding and the April balance works through the gap.
Lump sum or payments: three North Carolina cases
| Case | North Carolina tax | Federal tax | After tax |
|---|---|---|---|
| Single, $250,000 prize | $9,975 | $66,614 | $173,411 |
| Married couple, $2,000,000 prize, other income $85,000 | $79,800 | $675,861 | $1,244,340 |
| First Mega Millions annuity payment (October 20, 2026 jackpot) | $248,028 | $2,267,190 | $3,701,025 |
The annuity line takes the $413 million Mega Millions jackpot as 30 payments, each 5 % larger than the one before; the first is $6,216,243. North Carolina taxes each payment in the year it arrives at the rate of that year. Over the 30 years, the state share of the annuity adds up to $16,478,700, with the 2026 rate held constant. The annuity calculator lists every payment.
Virginians, South Carolinians and Tennesseans at North Carolina counters
The D-401 instructions for 2025 say that income a nonresident derives from gambling activities in North Carolina is subject to North Carolina tax (NC D-401 instructions). They do not name the lottery separately; this site applies the rule to North Carolina Lottery prizes, and the withholding rule above already applies to every winner. The instructions give no minimum prize.
| Winner | North Carolina tax | Home state tax | Kept |
|---|---|---|---|
| Virginia resident, North Carolina ticket | $9,565 | $14,375 | $159,446 |
| South Carolina resident, North Carolina ticket | $9,565 | $0 | $173,821 |
| Tennessee resident, North Carolina ticket | $9,565 | $0 | $173,821 |
The Virginia line is the expensive one. Virginia taxes its residents on lottery prizes from anywhere and its 2025 instructions exclude lottery and gambling winnings from the credit for tax paid to another state, so both states keep their full share. A Tennessean has no home tax at all, which leaves the North Carolina tax as the only state cost. For South Carolina, the pages read for this site do not say expressly how an out-of-state lottery prize of a resident is taxed, so the table shows no South Carolina line rather than an assumption.
North Carolina residents who win elsewhere
A North Carolinian who buys in Virginia or South Carolina is taxed there as a nonresident and then reports the prize at home. Form D-400TC, Part 1, gives the credit for tax paid to another state or country: the lesser of the North Carolina tax times the share of income taxed by the other state, or the net tax paid there, with a copy of the other return and proof of payment. On $250,000 bought in Virginia, the credit is $9,565 and $410 remains for North Carolina; the South Carolina case leaves $410. The small remainder comes from the proportional cap: the credit follows the share of North Carolina tax on the prize, not the tax actually paid elsewhere. Credits for tax paid to another state compares the rules.
No line for gambling losses
North Carolina itemized deductions are limited to mortgage interest and property taxes, charitable gifts, medical expenses and repayments under claim of right (NCDOR, itemized deductions). Gambling losses are not on that list. A resident who wins $25,000 at a casino and loses $20,000 is taxed by North Carolina on the full winnings, $997, whatever the federal return allows under the 90 % limit of the 2026 federal loss rule. Help with gambling problems is free and confidential at 1-800-MY-RESET.
What the official sources do not say
No official North Carolina text read for this site addresses annuity installments paid to a winner who has moved out of the state, so this page states no rule on them. Every amount above is an estimate on the 2026 rules for simple cases, not tax advice.