States With No Taxes or Low Taxes on Lottery WinningsĬalifornia, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming do not have lottery winnings withheld. This means that only federal tax rates would apply to winnings in these states. The rest of the winnings are expected to be paid by the winner when filing the return.įive states, Alabama, Alaska, Hawaii, Nevada, and Utah, do not take part in the national lottery. Before the winner receives any of the money, however, the IRS automatically takes 24% of the winnings. Winnings are taxed the same as wages or salaries are, and the total amount the winner receives must be reported on their tax return each year. Lottery winnings are considered ordinary taxable income for both federal and state tax purposes. Generally, report all gambling winnings under the Other income line of Schedule 1 (Form 1040). Any other gambling winnings subject to federal income tax withholding. Like other income in the United States, the IRS taxes lottery winnings. 600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager or 5.
There’s no doubt that winning the lottery is exciting and can significantly help the winner financially however, the winner must not be too quick to spend all of their winnings. Refer to the specific tax years tax return for the tax rate in effect.
