Forget about complicated tax calculations for your lottery winnings. Thanks to our simple tool, you only need to enter a couple of variables and check out your tax.
Here’s a quick guide on how to use our lottery tax calculator:
- Jackpot size – If you won a huge lottery prize, enter the exact sum here. You can enter any numeric value, making it easy to learn about different tax amounts for various sums.
- Pick your state – This is the state where you purchased the ticket. While the federal tax is always the same, state tax rates vary. Therefore, you need to enter the correct info to get accurate tax data.
- Click on Calculate Payout – It only takes a second for our tool to generate your taxes and payments. You’ll see amounts for a lump sum and annuity options, including gross payout, tax rates, and net payout. This will give you a specific comparison between two payment choices and make it easier to pick the right option for you.
Calculate Lottery Payout and Tax
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What is the Tax Rate for Lottery Winnings?
All lottery winnings are subject to tax. The tax rate for lottery winnings represents the portion of your winnings that goes to the government. You must report your winnings to the Internal Revenue Service (IRS) and state government as income. Winning the jackpot price automatically qualifies you for the top tax bracket, which means you may have to pay as high as 37 percent of your winnings as federal taxes and up to 8.82 percent as state taxes.
However, you can reduce the tax rate by choosing the annuity payment option to spread your winnings across several years. Consider hiring a tax expert so you can find ways to help you with tax and investment strategies.
Taxes on Lottery Winnings in the US Explained
| Type of taxes | Tax rate |
|---|---|
| Federal taxes | 24%-37% |
| State taxes | 0% – 8.82% |
| Local taxes | 1%-5% |
Federal Taxes on Lottery Winnings
Federal tax is applicable on the national level in the United States. Wherever you purchase the ticket for US Powerball or MegaMillions, you will have to pay the federal tax. The rate is set to 24%, which means that almost a fourth of your winning will go to the national government.
The table below shows the different tax rates for various income levels in the United States.
| Federal Income Tax Brackets for 2023 | ||||
|---|---|---|---|---|
| Single | Married Couple Filing Jointly | Married Couple Filing Separately | Head of Household | |
| 10% | Below $11,000 | Below $22,000 | Below $11,000 | Below $15,700 |
| 12% | $11,000 to $44,725 | $22,001 to $89,450 | $11, 000 to $44,725 | $15,700 to $59,850 |
| 22% | $44,726 to $95,375 | $89,451 to $190,750 | $44,726 to $95,375 | $59,851 to $95,350 |
| 24% | $95,376 to $182,100 | $190,751 to $364,200 | $95,376 to $182,100 | $95,351 to $182,100 |
| 32% | $182,101 to $231,250 | $364,201 to $462,500 | $182,101 to $231,250 | $182,101 to $231,250 |
| 35% | $231,251 to $578,125 | $462,501 to $693,750 | $231,251 to $346,875 | $231,251 to $578,100 |
| 37% | Above $578,125 | Above $693,750 | Above $346,875 | Above $578,100 |
- 10% on the first $11,000
- $1,100 plus 12% of the excess over $11,000
- $5,147 plus 22% of the excess over $44,725
- $16,290 plus 24% of the excess over $95,375
- $37,104 plus 32% of the excess over $182,100
- $52,832 plus 35% of the excess over $231,250
- $174,238 plus 37% of the excess over $578,125
Let’s illustrate the tax rate with an example. Say you make $60,000 yearly and win $100,000 in the lottery. This means your taxable income for the whole year is $160,000. The table above shows that your lottery win raised your tax bracket from 22% to 24%. However, that doesn’t imply you will pay a flat rate of 24% on the entire $160,000. The rate applies only to the portion of your income over $89,075. The table below shows how your federal tax will be calculated.
| Tax Rate | Portion of taxable income | Tax Paid |
|---|---|---|
| 10% | 10% on the first $11,000 | $1,100 |
| 12% | 12% on the next $33,725 | $4,047 |
| 22% | 22% on the next $50,650 | $11,143 |
| 24% | 24% of the next $64,625 | $15,510 |
| Total Tax Paid | $31,800 | |
If you end up in the top bracket, and that is often the case when jackpots are won, you might pay up to 37% on taxes. Consider hiring a tax expert to help you with paying taxes properly. They might be able to help you to find a way to qualify for deductions and not end up paying such large sums.
State Taxes on Lottery Winnings
State taxes are another form of tax that lottery winners in the US can expect. These will be charged in the state where you purchase the ticket. The taxes vary significantly because some states don’t impose taxes on players. Other states, however, can have rates up to 8.82%.
It is worth noting that six states do not even offer lotteries. The list includes Alabama, Utah, Nevada, Mississippi, Hawaii, and Alaska. Delaware and California do not impose taxes on players who purchase tickets. Several other states, including Wyoming, Washington, South Dakota, Texas, Tennessee, New Hampshire, and Florida don’t apply an income tax on the state level.
New York is the state with the harshest approach to taxes. It will take 8.82% of the entire sum. Maryland is a close second with 8.75%, and the District of Columbia imposes an 8.5%.
Here is an overview of exact tax rates by state:
| State | Tax rate | State | Tax rate |
|---|---|---|---|
| New York | 8.82% | Nebraska | 5% |
| Maryland | 8.75% | Massachusetts | 5% |
| District of Columbia | 8.5% | Maine | 5% |
| Oregon | 8% | Louisiana | 5% |
| New Jersey | 8% | Kentucky | 5% |
| Wisconsin | 7.65% | Kansas | 5% |
| Minnesota | 7.25% | Iowa | 5% |
| South Carolina | 7% | Arizona | 5% |
| Arkansas | 7% | Illinois | 4.95% |
| Connecticut | 6.99% | Michigan | 4.25% |
| Idaho | 6.92% | Virginia | 4% |
| Montana | 6.9% | Oklahoma | 4% |
| West Virginia | 6.5% | Ohio | 4% |
| Vermont | 6% | Missouri | 4% |
| New Mexico | 6% | Colorado | 4% |
| Rhode Island | 5.99% | Indiana | 3.23% |
| Georgia | 5.75% | Pennsylvania | 3.07% |
| North Carolina | 5.5% | North Dakota | 2.9% |
Local taxes
Local taxes are the ones that your municipality or county might charge on the winnings. If you compare them to federal taxes, these rates are far more favorable. In most cases, they will be from 1% to no more than 5%. It varies on your exact location, so make sure to consult the local regulations.
Additionally, some state and local lotteries could have what is called a retailer fee. Although this is a rare case, the retailer could be entitled to a fee that would be deducted from your prize.
Taxes on Lottery Winnings in the World
If you are living outside the United States, you might be subject to taxes in your home country. There are two situations that could happen:
- Winning in your home country – you are only subject to taxes in that country.
- Winning in another country – if you are a winner from abroad, you are subject to taxes in the country that organizes the lottery, and your home country.
Here is an overview of taxes in various countries:
| Country | Tax Rate |
|---|---|
| The United Kingdom | Tax-free |
| Australia | Tax-free |
| India | 28% tax |
| Russia | 10% tax on people who live 184 days a year in the country; 30% tax on people who live less than 184 days a year in the country |
| France | Tax-free |
| Canada | Tax-free |
| Germany | Tax-free |
| Italy | Local retailer fees on winnings from €100 to €500; 12% tax on winnings above €500 |
| Brazil | 13.8% taxes on all winnings |
| Japan | Tax-free |
| Chile | 17% tax on all winnings |
| Colombia | Tax-free up to COP70,000; 20% tax above COP70,000 |
| Poland | Tax-free up to PLN2,280; 10% tax above PLN2,280 |
| Portugal | 20% on winnings above €5,000 |
| Romania | 1% on winnings up to RON66,750; 16% tax + a flat RON667.50 on taxes from RON66,750 to RON445,000; 25% tax + a flat RON61,187.50 tax |
| Spain | 20% on winnings over €40,000 |
| Mexico | 1% federal tax + state tax 1.65% – 7% |
| Ukraine | 19.5% tax on all winnings |
| Peru | 10% tax on all winnings |
| South Africa | Tax-free |
| Ireland | Tax-free |
| France | Tax-free |
| Austria | Tax-free |
Taxes in Your Home Country
The approaches to lottery winning taxes largely vary from one country to another. You will find big countries that choose to tax modern rates. An example is Mexico, which has a 1% federal tax and a state tax that varies from 1.65% to 7%. Austria, Ireland, and South Africa are countries that stick to the tax-free policy.
Others, such as Spain, Poland, Colombia, and Portugal, take 20% of winnings above certain limits. Ukraine is pretty harsh with its policy since it takes 19.5% of all winnings.
What Are Your Payout Options When Winning the Lottery?
Depending on the lottery and the quantity of the prize, you might have two available payment options.
The first one is a lump sum cash payment. That method involves paying you the entire sum at once. Alternatively, you can choose annuities. These are usually yearly installments that allow you to spread the payment over several years or decades.
Make sure to check with your lottery provider which payment options are at your disposal.
| Type of payment | Pros | Cons |
|---|---|---|
| Lump-sum cash payment | Getting all the money at once Not having to wait until you receive future installments | The prize sum could be smaller compared to the sum paid in annuities If you are not sensible about spending money, you could end up losing it |
| Annuities | Very convenient for money management It prevents you from wasting money at once Bigger prize sums than in lump sum payments | You don’t get all the money at once The cash value can drop significantly over time |
What Are the Pros and Cons of Lump Sum Payments?
A lump-sum payment sounds tempting at first glance. Once you win a hefty sum, it is nice to see the entire amount in your bank account. To win such a huge prize, some people tend to rely on the lotto dominator, but before you do, you might want to check out if it’s really worth it! The fact that you have that much money at your disposal is attractive to anyone. You can spend the cash as you see fit, and no one can stop you.
That is both an advantage and a drawback. Most people aren’t used to that much cash at once and don’t know how to control their spending. That might lead to spending all the money and going broke without even realizing it. Living in luxury, spending on friends, and traveling around the world is expensive. You can easily waste the entire sum without any long-term planning.
Additionally, lump-sum jackpots might be smaller than prizes paid in annuities. That is because lotteries calculate inflation rates and other details. That is why you could end with 20% less sum than what was specified in the promised jackpot.
What Are the Pros and Cons of Annuities?
Annuities involve paying the prize in installments. These could be monthly or yearly installments, but it is usually the latter. Depending on the game terms and conditions, the prize could be spread in several annuities or across several decades.
The biggest advantage of annuities is that you will receive a bigger prize sum in total. However, you will receive that sum in multiple installments. It means you won’t have it available at once.
That could be a benefit if you are not wise at spending money. It could be a savings method and ensure that you have enough money in the long run. On the other hand, cash value could drop significantly over time. You never know what could go wrong, which is why you should carefully assess which method is better.
Final Thoughts
No doubt, playing the lottery is exciting, and winning a hefty prize is exhilarating. There are some tips as well, which guide the players on how to win the lottery like using lottery apps, prediction tools, lottery dream numbers, and last but not least Lucky Number Calculator or just to measure the odds using a lottery odds calculator. The initial happiness starts to fade once you realize that applicable taxes will take away a portion of your prize. That is why you should get yourself familiar with tax rates before purchasing a ticket. It is the right method to enjoy the games while knowing the exact sum that you could be taking home!
Now that you know the lottery payout and tax for lottery winnings, you will be able to make the best decision when claiming your prize. Here are the top lotteries with the highest jackpots.
| Lottery | Odds | Starting Jackpot |
|---|---|---|
| US Powerball | 1 in 292,201,338 | $20 million |
| Mega Millions | 1 in 302,575,350 | $20 million |
| Italy SuperEnalotto | 1 in 622,614,630 | €2 million |
| Euro Millions | 1 in 139,838,160 | €17 million |
| Euro Jackpot | 1 in 95,344,200 | €10 million |
FAQs
Do I need to pay taxes to the state where I bought the ticket even if I don’t live there?
That depends on the state, but most of them won’t impose additional taxes. Maryland and Arizona are the only two states that will charge you even if you don’t live there. All the other states and there are 43 of them, won’t impose additional taxes. However, make sure to check with the state where you reside for tax details.
Is it possible to adjust the amount of tax the lottery withholds?
Unfortunately, this is not possible. Wherever you purchase the lottery tickets, you will be subject to applicable taxes in that state or country. The exact rules depend on the location, but no individual has the power of changing tax policies and laws.
Will winning the lottery influence my tax bracket?
Yes, it is possible that what you win in the lottery will influence your tax bracket. The top federal tax rate might increase from 22% to more than 35%. If you were in the top bracket before the prize, you could expect a 37% tax. Otherwise, the chances are that you can hope for a less significant increase.
How Is Lottery Lump Sum Calculated?
The lottery rules imply you get less than the advertised jackpot amount if you pick a lump sum payment. Most lotteries use total funding allocated to the jackpot when calculating this prize. That’s roughly 61% of the advertised amount, but you get the entire sum immediately. You can also pick annuity payments, indicating you want to receive the total advertised sum, but in 30 yearly installments. Visit our detailed guide for lump sum vs. annuity payments to learn more about the available payout options.
Do You Pay Taxes on Lump Sum Lottery Winnings?
If taxes apply to that lottery, they will be applied to lump-sum payments. The difference is the lottery will first calculate your lump sum gross payout, and you pay taxes on that sum. For example, if the lotto jackpot is $1 million and your lump sum prize is $610K, you only need to pay taxes on the latter amount.
If Win the Lottery, How Much Can You Give Away Tax-Free?
According to the latest laws, you can give someone up to $15K annually as a gift without having to pay taxes. That sum is calculated per person, so you can give up to $15K to as many people as you see fit.
Do Senior Citizens Have to Pay Taxes on Lottery Winnings?
Yes, all citizens are subject to all lottery taxes that exist in their current location. You can calculate the exact tax rates on your prize to discover how much money you’ll actually receive.
Does Winning the Lottery Count as Income?
Yes, all net lottery winnings are ordinary taxable income. That means you’ll need to pay federal income tax to the IRS. The exact rate depends on your tax bracket.
Are Lottery Winnings Taxed Twice?
Nobody will charge you the same tax twice for lottery winnings. However, lotto wins in the United States are subject to state and federal taxes, while some areas even have local taxes. These are all charges you have to pay before you walk away with the lottery income. Additionally, if you are a foreigner, you might need to pay taxes in your home state. If you transfer the money to that country, see if you need to report the income and pay tax.
Do Lottery Winnings Count As Earned Income for Social Security Purposes?
No, lottery winnings do not count as earned incomes for social security purposes. Instead, social security defines lottery winnings as unearned income and subjects them to the general rules of income and income exclusions. So you will still get your social security benefits as a lottery winner, but it will be subject to tax.
Do I have to pay state taxes on lottery winnings if I don’t live in the state where I bought the ticket?
You will have to pay state taxes on lottery winnings in the state where you bought the ticket. You should get tickets from states with lower tax rates if you want lower tax rates. For instance, buying your ticket in North Carolina (with a tax rate of 5.5%) rather than in New York( with a tax rate of 8.82%)
Do You Have to Pay Taxes on Lottery Winnings Every Year?
You will pay taxes on lottery winnings annually if you get income from the lottery annually. Also, you will pay tax every year if you choose the annuity payment option.
Do the Elderly Pay Taxes on Lottery Winnings?
The elderly pay taxes on lottery winnings. The Internal Revenue Service and the state government consider lottery winnings taxable income, so everyone has to pay, regardless of age.
Do Seniors Pay Taxes on Lottery Winnings?
Seniors also pay taxes on lottery winnings. They must report their lottery winnings to the IRS so they can be taxed. Everybody has to pay taxes irrespective of their age or physical condition.
Can You Put Lottery Winnings in a Trust Fund & Not Pay Taxes on Them?
You can’t avoid paying taxes by putting your lottery winnings in a trust fund. Your winnings will be taxed at source by the IRS before it gets to you, so you won’t get the full amount from the lottery organizers. However, you can put the remaining amount in a lottery to reduce the impact of income taxes.
Do Military Pay Taxes on Lottery Winnings?
If you reside in a state where military members are exempted from income tax, you may be exempt from state taxes assuming the state views your winnings as regular income. Alaska, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are examples of states that exempt military members from personal income tax. However, they will be required to pay the state tax if they buy tickets from other states.
