Every US State Lottery Tax Rate, Ranked Worst to Best

The same jackpot, wildly different take-home

Federal tax on lottery winnings is 37% at the top bracket, no matter where you live. That part is fixed. What changes dramatically is the state tax, and the spread is enormous: from 0% in nine states to 10.9% in New York.

On a $100 million lump sum (after the cash option reduction), the difference between the best and worst state is over $10 million. That is not a rounding error.

The best states: 0% lottery tax

Nine states do not tax lottery winnings at all. Two of them (Alaska and Nevada) do not even have a state lottery, so the point is academic. The seven that matter:

Florida has no state income tax. Period. This is why so many big winners seem to come from Florida. It is also why some winners move there before claiming.

Texas is the same deal. No state income tax on anything, lottery included.

Tennessee, New Hampshire, South Dakota, Washington, and Wyoming round out the list. All have no state income tax or specifically exempt lottery winnings.

Then there is the California exception. California taxes income at rates up to 13.3%, but lottery winnings are specifically exempt from state tax. A $100 million winner in California pays the same state tax as one in Florida: zero. This surprises almost everyone.

The middle of the pack

Most states fall in the 4% to 7% range. That still adds up. On a $100 million lump sum, 5% state tax is $5 million.

Colorado charges 4.4%. Indiana charges 3.05% (one of the lowest among states that do tax winnings). Michigan charges 4.25%. Arizona charges 2.5% for residents (but 6% for non-residents, which catches a lot of tourists who buy tickets while visiting).

Illinois charges 4.95%. Pennsylvania charges 3.07%. Ohio charges a range from 2.75% to 3.5% depending on the amount.

North Carolina charges 4.5%. Georgia charges 5.39%. Virginia charges 5.75%. Massachusetts charges 5% on everything over $600.

The worst states

These states take the biggest bite, and the differences at the top are significant.

New York is the worst in the country at 10.9% state tax. If you live in New York City, add another 3.876% city tax. Total state and local tax: 14.776%. On a $100 million lump sum, that is $14.8 million to state and city on top of the $37 million to the feds. Your $100 million becomes about $48.2 million.

Maryland charges 8.75% to residents. Non-residents pay 8% but owe additional tax when they file in their home state.

New Jersey charges 10.75% on income over $1 million. On lottery winnings, you are always over $1 million.

Washington DC charges 10.75%, same as New Jersey.

Oregon charges 9.9% on income over $125,000. One of the highest flat-rate states.

Minnesota charges 9.85% on high income. Wisconsin charges 7.65%. Idaho charges 5.8% as a flat rate.

Real dollar comparison

Here is what a $100 million lump sum winner actually keeps in different states, after federal (37%) and state taxes:

Florida: $63 million. California: $63 million. Texas: $63 million. These are the best-case states.

Colorado (4.4%): $58.6 million. Illinois (4.95%): $58.05 million. Pennsylvania (3.07%): $59.93 million.

New Jersey (10.75%): $52.25 million. Oregon (9.9%): $53.1 million. Maryland (8.75%): $54.25 million.

New York state (10.9%): $52.1 million. New York City (10.9% + 3.876%): $48.2 million.

The gap between Florida and NYC is $14.8 million. On the same $100 million.

The withholding trap

When you claim a prize, the lottery commission withholds 24% for federal taxes and whatever the state rate is. But if you are in the 37% federal bracket (which any jackpot winner is), you owe an additional 13% at tax time.

A lot of winners do not plan for this. They see the check after withholding, spend aggressively, and then get a multi-million dollar tax bill in April. Some end up owing more than they have left.

Can you move to avoid state tax?

Technically, some states tax based on where the ticket was purchased, not where you live. Others tax based on residency at the time of claiming. A few tax based on where you were a resident when you bought the ticket.

Moving to Florida after winning but before claiming is a strategy some lawyers recommend, but it only works in certain states and certain circumstances. You need to establish genuine residency, not just a mailing address. State tax authorities have challenged these moves and sometimes won.

The legal fees for doing this properly run $50,000 to $200,000. On a $100 million prize, that is a rounding error. On a $2 million prize, it might not be worth the hassle.

The federal floor

No matter what state you are in, the federal government takes 37% of large lottery winnings. That is the biggest single bite. State tax is secondary.

There have been proposals in Congress to change how lottery winnings are taxed at the federal level, but none have gained traction. For now, 37% is the number to plan around.

Run the calculation for your specific state with a lottery tax calculator. The exact numbers depend on your filing status, other income, and deductions. But the state rankings do not change.