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How Much Tax Do You Pay on Lottery Winnings?


Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

Lottery winnings are usually subject to the normal income tax rates. Of course, there’s a good chance you’ll be in a much higher tax bracket.

What’s the tax rate on lottery winnings?

The tax rate on lottery winnings depends on your income tax bracket.

The highest federal tax bracket is 37%. The 37% tax rate applies to income of about $500,000 or more.

Most state income taxes are around 5% to 13%.

If you win a smaller prize, it would be similar to getting a bonus from your job. Your lottery winnings get added to your regular income, so your tax rate would depend on your total income for the year.

Note that FICA taxes don’t apply to lottery winnings, because lotto winnings aren’t earned income.

When do you pay state taxes on lottery winnings?

If you play the lottery in your home state and win, you’ll usually pay state taxes if your state has an income tax.

If you play the lotto in another state, both your home state and the other state could potentially tax you. However, you typically get a tax credit so you don’t get double taxed. For example, if one state taxes 5% and the other taxes 10%, you usually only have to pay 10% instead of 15%.

What is the minimum amount to pay taxes on lottery winnings?

You generally need to pay taxes on all lottery winnings. The main exception would be if your total income wasn’t high enough to be required to file a tax return.

You may not get a Form W-2G reporting your winnings if you won less than $600. However, the income is still generally reportable.

How much tax is withheld on lottery winnings?

The default withholding rate for federal taxes is 24%. This often won’t be enough if your income is over around $150,000. At that point, you’ll likely be in the 32%, 35%, or 37% tax bracket.

You may want to ask the lottery agency to withhold more in taxes. If they don’t, you should make an estimated tax payment for the difference.

State tax withholding amounts will vary by state. As with federal taxes, make sure the state is withholding enough and make an estimated tax payment if it’s not.

How much are taxes if you take annual payments?

If you take annual payments instead of a lump sum, you generally report the income in the year you receive it.

Taking annual payments can often result in lower taxes. Instead of having one year in a very high tax bracket, you may be in a lower tax bracket each year you receive an installment payment.

Can you claim losing lottery tickets on your taxes?

You may be able to deduct the cost of lottery tickets on your federal tax return. In order to do so, you typically need to itemize your deductions.

You usually can’t deduct more than you won during the year. So if you want to deduct $100 in lottery tickets, you need to have won $100 or more during that year.

As with other deductions, you will need to keep receipts showing how much you spent and what you purchased. Old tickets may also be acceptable if they have a date and cost on them.

Some states follow similar rules and allow you to deduct the cost of your tickets. Others don’t allow you to deduct the cost of your tickets.