Powerball Taxes by State: Complete 2025 Tax Guide

Understanding Lottery Taxes

Winning the Powerball jackpot is life-changing, but before you start spending, it's crucial to understand how much of your winnings will go to taxes. This guide breaks down federal and state taxes on lottery winnings.

Federal Taxes on Lottery Winnings

The IRS considers lottery winnings as ordinary income. Here's what you need to know:

Automatic Withholding

24% federal withholding on prizes over $5,000
This is just a prepayment - you may owe more at tax time

Actual Tax Rate

Your final tax rate depends on your total income. For large jackpots:

Top federal tax bracket: 37% (for income over $578,125)
This means an additional 13% may be owed beyond the 24% withholding

States with NO Lottery Tax

These states won't take any additional state tax from your winnings:

State	Notes
California	No state tax on lottery winnings
Delaware	No state tax on lottery winnings
Florida	No state income tax
New Hampshire	No state income tax
South Dakota	No state income tax
Tennessee	No state income tax
Texas	No state income tax
Washington	No state income tax
Wyoming	No state income tax
Puerto Rico	No state tax on lottery winnings

States with Highest Lottery Taxes

If you're unlucky enough to win in these states, expect a bigger tax bill:

State	Tax Rate
New York	8.82% (+ NYC: 3.876%)
Maryland	8.95%
New Jersey	8.00%
Oregon	8.00%
Wisconsin	7.65%
Minnesota	7.25%
South Carolina	7.00%
Connecticut	6.99%
Montana	6.90%

State-by-State Tax Rates

Here's a complete breakdown of lottery tax rates by state:

0% Tax States

California, Delaware, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming, Puerto Rico

1-4% Tax States

North Dakota: 2.90%
Pennsylvania: 3.07%
Indiana: 3.23%
Michigan: 4.25%
Louisiana: 4.25%
Colorado: 4.40%
Arizona: 4.50%
Missouri: 4.00%
Virginia: 4.00%
Ohio: 4.00%
Oklahoma: 4.75%

5-6% Tax States

Iowa: 5.00%
Kansas: 5.00%
Kentucky: 5.00%
Maine: 5.00%
Massachusetts: 5.00%
Mississippi: 5.00%
Nebraska: 5.00%
North Carolina: 5.25%
Arkansas: 5.50%
Idaho: 5.80%
New Mexico: 5.90%
Illinois: 4.95%
Rhode Island: 5.99%
Vermont: 6.00%

7%+ Tax States

West Virginia: 6.50%
South Carolina: 7.00%
Minnesota: 7.25%
Wisconsin: 7.65%
New Jersey: 8.00%
Oregon: 8.00%
D.C.: 8.50%
Georgia: 5.75%
New York: 8.82%
Maryland: 8.95%

Example: $100 Million Jackpot

Let's calculate taxes on a $100 million jackpot in different scenarios:

Lump Sum (approximately $50 million)

In California (0% state tax):

Federal tax (37%): $18,500,000
State tax: $0
Take home: ~$31,500,000

In New York (8.82% state tax):

Federal tax (37%): $18,500,000
State tax (8.82%): $4,410,000
NYC tax (3.876%): $1,938,000
Take home: ~$25,152,000

Annuity (30 years)

Annual payment: ~$3.33 million
Taxes spread across 30 years
May result in lower effective tax rate

Tips to Minimize Lottery Taxes

1. Consider the Annuity Option

Taking payments over 30 years may keep you in lower tax brackets.

2. Charitable Donations

Donating to qualified charities can reduce your taxable income.

3. Consult a Tax Professional

Hire an experienced tax attorney and financial advisor immediately after winning.

4. Consider Your State of Residence

If you're planning to move, understand residency rules before claiming.

5. Set Up Trusts

Work with attorneys to establish trusts for privacy and estate planning.

Important Considerations

Residency Matters

You'll pay taxes based on where you live, not where you bought the ticket. However, some states may require non-residents to pay state taxes.

Claiming Period

Don't rush to claim your prize. Take time to assemble a team of financial advisors, tax attorneys, and estate planners.

Tax Payments

The 24% federal withholding is just a deposit. You'll likely owe more when you file your tax return.

Conclusion

While taxes on lottery winnings can be substantial, understanding them beforehand helps you plan effectively. The difference between winning in California versus New York could be millions of dollars!

Check out our state-by-state pages for specific tax information and lottery rules in your state.

This article is for informational purposes only. Consult a qualified tax professional for advice specific to your situation.