State-by-State Lottery Tax Guide 2025

You won the lottery! Congratulations! But before you start planning how to spend it, you need to understand taxes. The difference between states can be millions of dollars.

Federal Taxes (Everyone Pays These)

No matter which state you live in, you'll pay federal taxes:

Federal Withholding

24% withheld immediately when you claim
This is just a down payment on your total federal tax

Total Federal Tax

37% top tax bracket for jackpot winners (2025 rates)
You'll owe an additional ~13% when you file your taxes

Example: $500 Million Lump Sum

Immediate withholding (24%): $120 million
Additional owed (13%): $65 million
Total federal tax (37%): $185 million
You keep after federal: $315 million

State Taxes: The Big Variable

State taxes range from 0% to 8.82%. Where you live matters!

🎉 ZERO State Tax States (Winners Keep the Most!)

These states don't tax lottery winnings at all:

California

State tax: 0%
On $500M lump sum, you save: $44 million vs. New York!
Notes: Only state that doesn't tax lottery winnings specifically (other income is taxed)

Florida

State tax: 0%
No income tax on anything
Anonymity: Not allowed
Notes: Many winners move here before claiming

Texas

State tax: 0%
Anonymity: Allowed! (Best of both worlds)
Notes: Also no state income tax

Washington

State tax: 0%
No state income tax
Notes: Has capital gains tax on high earners, but not lottery

Tennessee

State tax: 0%
Anonymity: Not allowed
Notes: Eliminated Hall income tax in 2021

South Dakota

State tax: 0%
No income tax
Anonymity: Allowed!

Wyoming

State tax: 0%
No income tax
Anonymity: Allowed!

New Hampshire

State tax: 0%
No broad-based income tax
Notes: Taxes interest/dividends over $2,400 (being phased out)

💰 Low Tax States (2-5%)

Arizona

State tax: 4.5%
On $500M: ~$22.5 million tax
Anonymity: Allowed
You keep: ~$292.5M after federal + state

Pennsylvania

State tax: 3.07%
On $500M: ~$15.4 million tax
Anonymity: Not allowed
You keep: ~$299.6M

Indiana

State tax: 3.15%
On $500M: ~$15.8 million tax
Anonymity: Not allowed

North Dakota

State tax: 2.9%
On $500M: ~$14.5 million tax
Anonymity: Allowed

Louisiana

State tax: 4.75%
On $500M: ~$23.8 million tax
Anonymity: Not allowed

Ohio

State tax: 3.99%
On $500M: ~$20 million tax
Anonymity: Allowed

Oklahoma

State tax: 4.75%
On $500M: ~$23.8 million tax

📊 Moderate Tax States (5-7%)

Colorado

State tax: 4.4%
On $500M: ~$22 million tax
You keep: ~$293M

Georgia

State tax: 5.75%
On $500M: ~$28.8 million tax
Anonymity: Allowed
You keep: ~$286.2M

Illinois

State tax: 4.95%
On $500M: ~$24.8 million tax
You keep: ~$290.2M

Kansas

State tax: 5.7%
On $500M: ~$28.5 million tax
Anonymity: Allowed

Kentucky

State tax: 6%
On $500M: ~$30 million tax
You keep: ~$285M

Michigan

State tax: 4.25%
On $500M: ~$21.3 million tax
Anonymity: Allowed
You keep: ~$293.7M

Missouri

State tax: 4.8%
On $500M: ~$24 million tax
Anonymity: Allowed

Montana

State tax: 6.75%
On $500M: ~$33.8 million tax
Anonymity: Allowed

North Carolina

State tax: 5.25%
On $500M: ~$26.3 million tax
You keep: ~$288.7M

West Virginia

State tax: 6.5%
On $500M: ~$32.5 million tax
Anonymity: Allowed

Wisconsin

State tax: 7.65%
On $500M: ~$38.3 million tax
You keep: ~$276.7M

💸 High Tax States (8%+)

New York

State tax: 8.82% (HIGHEST!)
On $500M: ~$44.1 million tax
Anonymity: Not allowed (double whammy!)
You keep: ~$270.9M
Notes: NYC adds additional 3.876% city tax if you live in the city!

Maryland

State tax: 8.75%
On $500M: ~$43.8 million tax
Anonymity: Allowed (at least there's that)
You keep: ~$271.2M

New Jersey

State tax: 8.0%
On $500M: ~$40 million tax
Anonymity: Allowed
You keep: ~$275M

Oregon

State tax: 8.0%
On $500M: ~$40 million tax
Anonymity: Not allowed
You keep: ~$275M

Minnesota

State tax: 7.25%
On $500M: ~$36.3 million tax
Anonymity: Allowed
You keep: ~$278.7M

Connecticut

State tax: 6.99%
On $500M: ~$35 million tax
You keep: ~$280M

Idaho

State tax: 6.5%
On $500M: ~$32.5 million tax

🎯 Best States for Lottery Winners (2025)

Considering BOTH taxes and anonymity:

🥇 Top Tier (Best Overall)

Texas - 0% tax + anonymity allowed
Wyoming - 0% tax + anonymity allowed
South Dakota - 0% tax + anonymity allowed

🥈 Second Tier (Great but Public)

Florida - 0% tax (but no anonymity)
California - 0% lottery tax (but no anonymity)
Washington - 0% tax (but no anonymity)

🥉 Third Tier (Low Tax + Privacy)

Delaware - 0% tax + anonymity
Arizona - 4.5% tax + anonymity
North Dakota - 2.9% tax + anonymity

🚫 Worst States for Winners

New York - 8.82% tax + no anonymity + possible NYC tax
New York City - 12.7% total (state + city!)
Maryland - 8.75% tax (but at least allows anonymity)
Oregon - 8% tax + no anonymity

Real-World Tax Comparison

Let's say you win a $1 billion jackpot:
- Cash option: $500 million
- Federal tax (37%): -$185 million
- Remaining after federal: $315 million

What You Keep by State:

State	State Tax	Total Kept	Rank
Texas	$0	$315.0M	🥇 1st
Florida	$0	$315.0M	🥇 1st
California	$0	$315.0M	🥇 1st
North Dakota	$14.5M	$300.5M	4th
Pennsylvania	$15.4M	$299.6M	5th
Indiana	$15.8M	$299.2M	6th
Arizona	$22.5M	$292.5M	10th
Wisconsin	$38.3M	$276.7M	20th
New Jersey	$40.0M	$275.0M	25th
Maryland	$43.8M	$271.2M	30th
New York	$44.1M	$270.9M	🚫 LAST

Difference between best and worst: $44.1 million!

Special Situations

You Bought a Ticket While Traveling

Bad news: You pay taxes where you bought the ticket, not where you live.

Example: You live in Florida (0% tax) but bought a ticket in New York (8.82% tax):
- You'll pay New York's 8.82% state tax
- You DON'T get credit from Florida (they have no tax anyway)
- You lose $44M+ on a $500M prize

Lesson: Only buy tickets in your home state (or low-tax states)!

You Won But Don't Live in a Lottery State

Some states don't have lotteries:
- Alabama
- Alaska
- Hawaii
- Mississippi (just started in 2020)
- Nevada
- Utah

If you live there but buy a ticket while traveling, you pay taxes in the state where you bought it.

Moving States Before Claiming

Can you move to avoid taxes? Maybe, but it's complicated:

What lottery commissions check:
- Driver's license address
- Voter registration
- Where ticket was purchased
- Your residence when you bought the ticket
- How long you've lived in new state

The Reality: Very hard to prove you legitimately moved. Most lottery agencies will see through it.

What DOES work: Establish residency BEFORE you start playing:
- Move to Texas/Florida
- Get driver's license
- Register to vote
- Rent/own a home
- Live there 6+ months
- THEN start playing

Anonymity by State (2025)

States that allow winners to remain anonymous:

✅ Allow Anonymity (18 states):
- Arizona, Delaware, Georgia, Kansas, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, New Jersey, North Dakota, Ohio, South Carolina, Texas, Virginia, West Virginia, Wyoming

❌ No Anonymity (32 states + DC):
- All others (including California, Florida, New York)

Creative option: Even in no-anonymity states, you can:
- Claim through a trust or LLC
- Use a generic name ("The Smith Family Trust")
- Have your lawyer's address listed
- Minimize personal exposure

Tax Planning Strategies

1. Move Before You Win (If You Haven't Yet)

If you play regularly and live in a high-tax state:
- Consider moving to Texas, Florida, Wyoming, or another 0% state
- Establish legitimate residency
- Start playing after 6-12 months
- Potential savings: $40+ million

2. Charitable Donations

Donate to qualified charities
Get tax deduction (up to 60% of AGI)
Reduces taxable income
Potential savings: Millions in taxes

Example: Win $500M, donate $50M to charity:
- Tax deduction: ~$18.5M (37% rate)
- You still have $450M
- Plus the good karma!

3. Set Up Trusts

Irrevocable trusts for family
Reduces estate tax burden
Protects assets from lawsuits
Provides for future generations

4. Spread Income Over Time (Annuity)

30 annual payments
Keeps you in lower tax brackets each year
Total taxes may be less than lump sum
Protected from overspending

5. Invest Tax-Efficiently

Municipal bonds (tax-free interest)
Index funds (lower capital gains)
Roth conversions
Estate planning

Common Tax Mistakes

❌ Not Withholding Enough

The 24% federal withholding isn't enough. You'll owe 37% total. Save the extra 13%!

❌ Forgetting Estimated Quarterly Payments

You'll need to make quarterly tax payments on investment income. Missing them = penalties.

❌ Not Hiring a Tax Professional

Do-it-yourself taxes on $300M? Bad idea. Hire a tax attorney and CPA.

❌ Making Large Gifts Without Planning

Gifts over $18,000/year per person trigger gift tax reporting. Plan carefully.

❌ Not Considering Estate Tax

If you die with $300M, your heirs might owe 40% estate tax. Plan now!

The Bottom Line

Best Case Scenario:

Win in: Texas, Florida, or California
Claim: Through LLC/trust (if allowed)
Choose: Lump sum (usually)
Hire: Tax attorney immediately
Keep: ~$315M on $500M prize

Worst Case Scenario:

Win in: New York City
Claim: Publicly in your name
Choose: Without professional advice
Hire: Nobody
Keep: ~$265M on $500M prize (lost $50M!)

The difference between best and worst: $50 million!

Tax FAQ

Q: Can I donate the entire jackpot to avoid taxes?
A: No. You're taxed when you receive it, then get a deduction for donations. You can't bypass the initial tax.

Q: What if I move to another country?
A: US citizens pay US taxes on worldwide income, including lottery winnings. You can't escape by moving abroad.

Q: Can I split the ticket with family to lower taxes?
A: No. If you claim it first, then "gift" it to family, you'll pay taxes PLUS gift tax.

Q: Is the annuity taxed differently?
A: Yes. You're taxed on each payment as received. Potentially lower overall tax if rates drop.

Q: What about state estate taxes?
A: Some states have estate taxes separate from federal. Plan accordingly!

Resources

IRS Lottery Winnings: irs.gov/taxtopics/tc419
State Tax Agencies: Contact your state's department of revenue
Find a Tax Attorney: americanbar.org
Find a CPA: aicpa.org

Final Thoughts

Taxes will take a big chunk of your lottery winnings - there's no way around it. But smart planning can save you millions:

Location matters: 0% vs. 8.82% = $44M difference
Anonymity matters: Privacy = priceless
Planning matters: Hire professionals
Charity matters: Donations reduce taxes
Patience matters: Don't claim immediately

The best tax strategy: Win in Texas, claim through a trust, hire a great team, and donate generously!

Want to see the math? Use our Annuity Calculator to calculate taxes on any jackpot amount!

Just won? Check your ticket with our Number Checker!

Still dreaming? Generate your numbers with our Number Generator!