Are lottery prizes taxable?
Lottery winnings of $600.01 and over are subject to Federal Withholding tax. For
winnings of $600.01, up to and including $5,000, you will be issued a W-2G form
to report your winnings on your federal income tax form. For winnings of
$5,000.01 and over, your state’s Department of Revenue removes the 24 percent federal
withholding before you receive your winnings check (or, if it is
an annuity, from each winnings check). You then receive a W-2G form with each
check to submit with your 1040 form to show that the 24 percent federal
withholding already has been paid. In addition to federal tax, your state will
make additional withholdings for taxes, and most states will deduct other money that
you may owe to the state, such as back taxes, child support, loan payments, etc.
In addition, like the federal tax withholding, the state tax withholding at the time
of prize payout may not be the total state tax owed at the end of the year.
You must consult your state division of taxation for more information about the total
state tax requirements for lottery winners.
The state tax withholdings are as follows:
|Arizona||5% state withholding (Arizona residents), 6% state withholding (non-Arizona residents)|
|Arkansas||7% state withholding|
|California||No state tax on lottery prizes|
|Colorado||4% state withholding|
|Connecticut||6.99% state withholding|
|Delaware||No state tax on lottery prizes|
|Florida||No state tax on lottery prizes|
|Georgia||6% state withholding|
|Idaho||6.925% state withholding|
|Illinois||4.95% state withholding|
|Indiana||3.23% state withholding|
|Iowa||5% state withholding|
|Kansas||5% state withholding|
|Kentucky||5% state withholding|
|Louisiana||5% state withholding|
|Maine||5% state withholding|
|Maryland||8.95% state withholding (Maryland residents), 8% state withholding (non-Maryland residents)|
|Massachusetts||5% state withholding|
|Michigan||4.25% state withholding|
|Minnesota||7.25% state withholding|
|Mississippi||5% state withholding|
|Missouri||4% state withholding|
|Montana||6.9% state withholding|
|Nebraska||5% state withholding|
|New Hampshire||No state tax on lottery prizes|
|New Jersey||8% state withholding|
|New Mexico||6% state withholding|
|New York||8.82% state withholding, plus: 3.876% (NYC residents), 1.323% (Yonkers residents)|
|North Carolina||5.499% state withholding|
|North Dakota||2.9% state withholding|
|Ohio||4% state withholding|
|Oklahoma||4% state withholding|
|Oregon||8% state withholding|
|Pennsylvania||3.07% state withholding|
|Puerto Rico||No state tax on lottery prizes|
|Rhode Island||5.99% state withholding|
|South Carolina||7% state withholding|
|South Dakota||No state tax on lottery prizes|
|Tennessee||No state tax on lottery prizes|
|Texas||No state tax on lottery prizes|
|U.S. Virgin Islands||† Unknown State Tax Rate|
|Vermont||6% state withholding|
|Virginia||4% state withholding|
|Washington||No state tax on lottery prizes|
|Washington, D.C.||8.5% state withholding|
|West Virginia||6.5% state withholding|
|Wisconsin||7.65% state withholding|
|Wyoming||No state tax on lottery prizes|
† This state/jurisdiction has not responded to our requests for this information.
Why is the cash option different than the advertised jackpot?
The Powerball jackpot is an estimated 29-year annuity value, with a total 30 payments (the first payment happens right away, followed by 29 annual payments). When players choose
the annuity option for their prize, the state lottery pays the prize out over 29 years (30 payments) by
buying U.S. Government Treasury Securities, which earn interest and mature annually over
the 29 years. That annual return is the amount the winners receive each year for the
29 year period. With the cash option, the state lottery will take the amount of
money that would have been invested and will pay it directly to the winner in one
payment. Both payment options have federal and applicable state taxes deducted
from them, although with an annuity option you pay taxes gradually on each annual payout, not all at once like with the cash option.
Can non-US citizens play? What if a non-US citizen wins?
Yes, non-US citizens can legally play, and non-US citizens are eligible to win any prize offered in the game.
If a non-US citizen wins, they would claim their prize in the same manner that a US citizen would, but the taxes withheld would be different. For example, federal withholding for non-US citizens is a flat 30%. Also, individual states may have different tax structures for non-US citizens than they do for US citizens. Depending on which country the person is a legal resident of, there also may be tax treaties between the US and that other country which could be helpful in offsetting whatever the US tax liabilities are.
In short, non-US citizens can play and win Powerball. If a non-US citizen wins a large prize, they will be responsible for some amount of tax, which in the end will probably be an amount similar to what a US citizen would pay, but there are so many possible variations with international tax codes that you’ll need to consult with a local tax attorney if you need to know a precise amount of tax liability.
What is the Power Play?
Power Play is an option that is currently offered in all states that sell Powerball tickets except California. For an extra $1.00 per ticket you can increase your non-jackpot prize winnings by 2, 3, 4, 5, or 10 times. (The 10 times Power Play is only available when the jackpot is $150 million or less.) The Power Play number is randomly drawn from a pool of multipliers that includes two 5Xs, three 4Xs, 13 3Xs, and 24 2Xs, plus one 10X when the jackpot is $150 million or less.
Power Play is not available in California because of state law that requires all lottery prizes to be paid out on a pari-mutuel basis.
The Power Play multiplier number is chosen at random just before the Powerball winning numbers are drawn.
A player must choose the Power Play option when they buy their Powerball ticket, and then the ticket must match one of the 9 Ways to Win (except the jackpot) before the multiplier takes effect. Power Play costs an extra $1 per play. See How to Play Powerball for more information.