Winnings & the IRS
How lottery winnings are taxed in 2026
Lottery prizes are taxed as ordinary income by the IRS. When you claim a prize over $5,000, the lottery agency withholds 24% for federal taxes before you receive a check. That withholding is only a down payment: the top federal bracket is 37% in 2026 (IRS Rev. Proc. 2025-32), so most large jackpots owe an additional 13 percentage points when you file your return the following April.
Lump sum vs annuity: the tax trade-off
The advertised jackpot is the annuity value, paid in 30 graduated annual installments. The lump sum, or cash option, is the present value of those future payments and typically runs about 55% to 65% of the headline number. Choosing the lump sum means a smaller total payout but all the money at once. The annuity spreads income over three decades, keeping each annual slice in a potentially lower bracket, but you give up control and investment flexibility.
| Advertised jackpot | Lump sum (~60%) | Federal tax | After-tax (no state) |
|---|---|---|---|
| $500,000 | $300,000 | ~$82,300 | ~$217,700 |
| $1,000,000 | $600,000 | ~$193,300 | ~$406,700 |
| $10,000,000 | $6,000,000 | ~$2,189,000 | ~$3,811,000 |
| $100,000,000 | $60,000,000 | ~$22,089,000 | ~$37,911,000 |
Lump sum at 60% of advertised, single filer, 2026 federal brackets, no state tax. State taxes can take an additional 0% to ~13%.
State taxes on lottery winnings
State taxes vary from nothing to over 10%. Nine states have no income tax at all (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming). California and Delaware exempt lottery specifically. New York City residents face a combined state and city rate near 13%. Enter your state's rate in the calculator above for a personalized estimate.
Questions
Lottery tax calculator FAQ
How much tax do you pay on lottery winnings?
The IRS withholds 24% from lottery prizes over $5,000 at the time of payout, but your actual federal tax bill depends on your total income for the year. Large jackpots push most of the winnings into the top 37% bracket, so you typically owe an additional 13% or more at filing time. State taxes add 0% to roughly 13% on top, depending on where you live.
What is the difference between lump sum and annuity for lottery?
The lump sum, or cash option, pays you the present value of the jackpot in one check — usually about 55% to 65% of the advertised prize. The annuity pays the full advertised amount in 30 annual installments. The lump sum is smaller upfront but gives you immediate access; the annuity is larger in total but spreads payments over three decades.
Which states do not tax lottery winnings?
Nine states have no state income tax and therefore do not tax lottery winnings: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Two additional states — California and Delaware — exempt lottery winnings from state income tax even though they tax other income.
Is the 24% federal withholding the final tax on lottery winnings?
No. The 24% is only a mandatory withholding at the time of payout. Your actual tax rate on a large jackpot is likely 37% (the top federal bracket), so you will owe the difference when you file your return. On a $1 million lump sum, that gap can be over $100,000 in additional federal tax beyond what was withheld.
Do you pay FICA taxes on lottery winnings?
No. Lottery winnings are not earned income, so they are not subject to Social Security or Medicare (FICA) taxes. They are taxed as ordinary income for federal and state income tax purposes only.
Can you reduce taxes on lottery winnings?
Limited options exist. You cannot avoid federal income tax on gambling winnings, but you can deduct gambling losses up to the amount of your winnings if you itemize. Charitable donations of a portion of winnings can also lower your taxable income. Choosing the annuity spreads income over 30 years, keeping each year in a lower bracket, but the total tax paid is often similar.
- Sources: IRS (24% mandatory withholding on prizes >$5,000) · IRS Rev. Proc. 2025-32 (2026 brackets, top rate 37%) · State lottery commission published tax rates.
- 🔄 Last updated July 2026 · Tax year 2026
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