Tennessee lottery tax: zero at home, not always next door
Tennessee does not tax lottery winnings, and no Tennessee tax touches a prize from any other state either. The neighbors are the variable.
- Tennessee tax on prizes
- $0
- Federal withholding
- 24 %
- Withheld above
- $5,000
- Hall income tax
- repealed for 2021 on
State and local tax, ticket bought in Georgia
$49,194
Bought at home in Tennessee: $0. Difference: $49,194.
| Prize this year | $1,000,000 |
| Federal income tax (top rate reached 37 %) | $337,180 |
| Georgia tax as a nonresident | $49,194 |
| Tennessee tax | none |
| Withheld when the prize is paid | $289,900 |
| Still to pay with the return | $96,474 |
| After all taxes | $613,626 |
Georgia taxes nonresidents on prizes of its lottery. Tennessee has no personal income tax on a lottery prize.
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
Tennessee has no personal income tax: the Hall income tax, which only ever reached interest and dividends, was repealed for tax years beginning on or after January 1, 2021, and the Tennessee Lottery states that the State of Tennessee does not tax lottery winnings. A Tennessean who wins $250,000 on a Tennessee ticket pays $66,614 of federal tax at the 2026 brackets and keeps $183,386. The lottery withholds 24 % for the IRS on a prize over $5,000, so $6,614 remains due with the return. Tennessee borders eight states, and several tax nonresidents on prizes of their lotteries: the same $250,000 won on a Kentucky ticket costs $8,655 in Kentucky tax, and on a Georgia ticket $11,871. Because Tennessee has no income tax, there is no credit to recover any of it. A winner who keeps the annuity and later moves to a state with an income tax pays that state on the installments that follow.
Tennessee resident, ticket from a neighboring state
State and local tax, ticket bought in Kentucky
$8,655
| Prize this year | $250,000 |
| Federal income tax (top rate reached 35 %) | $66,614 |
| Kentucky tax as a nonresident | $8,655 |
| Tennessee tax | none |
Why Tennessee takes nothing
For decades Tennessee's only income tax was the Hall tax, a levy on interest and dividends that never touched wages. It was phased down from 2017 and repealed in full for tax years beginning on or after January 1, 2021 (Tennessee Department of Revenue, HIT-3). Even before the repeal, lottery money was outside it: the Department's notice HIT-19 says lottery funds were not subject to the Hall income tax (HIT-19). Today the Tennessee Lottery's own answer to winners is direct: the State of Tennessee does not tax lottery winnings, but prizes are subject to federal income taxes (Tennessee Lottery, I Won! Now What?).
The one state hold on a prize has nothing to do with income tax. A winner who owes the State certain tax debts can see the prize applied to that debt before it is paid, a setoff described by the Department of Revenue; the official notice was not read in full for this page, so its threshold is not given here.
The federal side of a Tennessee prize
With the state out of the picture, the whole question is the IRS. Prizes over $5,000 are withheld at 24 %; the prize is then added to the year's income and taxed at the 2026 brackets of Rev. Proc. 2025-32. On larger prizes the brackets outrun the withholding. A married couple in Knoxville with $90,000 of wages who takes the cash value of the October 21, 2026 Powerball jackpot, $267.5 million, owes $98,912,111 in federal tax, has $64,200,000 withheld at the claim, and keeps $168,587,890. Withholding against the tax due shows how to size the April payment.
Eight borders, different rules
Tennessee touches Kentucky, Virginia, North Carolina, Georgia, Alabama, Mississippi, Arkansas and Missouri. People in Bristol, Chattanooga or Clarksville cross state lines for groceries and fuel, and lottery tickets come home with them. A prize is taxed by the state that sold the ticket when that state taxes nonresidents on its lottery, and a Tennessean has no home return on which to take a credit for it.
| Tennessee resident, ticket sold in | Tax of that state | Federal | Kept |
|---|---|---|---|
| Tennessee | $0 | $66,614 | $183,386 |
| Kentucky | $8,655 | $66,614 | $174,731 |
| Georgia | $11,871 | $66,614 | $171,514 |
| North Carolina | $9,565 | $66,614 | $173,821 |
| Virginia | $13,718 | $66,614 | $169,667 |
Each line follows the rules the selling state publishes for nonresidents; nonresident lottery tax lists them state by state. The gap between the first and the most expensive line, $13,718, is money that stays out of reach for good, because no Tennessee return exists to offset it.
Kentuckians and Georgians who win in Tennessee
Tennessee does not tax nonresidents either, so a ticket sold in Tennessee adds no state tax where it was bought. It does not make the prize tax-free for a buyer from a state with an income tax. Kentucky taxes its residents on lottery winnings from other states, so a Kentucky resident with a $250,000 Tennessee prize owes Kentucky $8,750; a Georgia resident owes Georgia $12,475. The Tennessee ticket only spares them the problem of two states taxing the same prize. Tickets bought in another state covers every combination.
Keeping the annuity, then leaving Tennessee
An annuity payment is income of the year it arrives, taxed by the state where the winner lives that year. A Tennessean who keeps the $635 million Powerball annuity and never moves pays no state tax on any of the 30 payments, which total $635,000,000 before tax. If the same winner moves to Georgia, Georgia taxes the payments received as a Georgia resident: over the 30 years that comes to $31,686,500, assuming the move happens before the first payment and 2026 rates hold. Tennessee never had a claim, so nothing follows the winner from the old address. Moving after winning looks at the opposite case, states that keep taxing former residents.
What the sources did not settle
The Tennessee Lottery and the Department of Revenue block automated reading, so their pages were read through archived copies dated late 2025. Those copies agree with the repeal of the Hall tax and with the Lottery's statement that prizes are taxed only federally. The figures above are estimates on 2026 rules, not tax advice. Play stays an entertainment for most; for anyone else, the National Problem Gambling Helpline answers at 1-800-MY-RESET (National Council on Problem Gambling).