The March 26 Mega Millions winning ticket for the $1.13 billion jackpot was sold in New Jersey. The amount had climbed recently with players across the country hoping to win. However, as you know, the Mega Millions winner will have to pay considerable federal taxes on that prize.
The IRS takes federal tax “off the top.” But the winner then pays additional federal income taxes based on the tax rate tied to their federal tax bracket, which will be high due to the multibillion-dollar payout. Depending on where they live, the winner may also pay state taxes. (The same is true for a Powerball winner.)
These 8 states don't tax lottery winnings
But if you live in certain states and win the Mega Millions lottery, you won’t have to pay that additional state tax, which means a lot of savings compared to someone who wins in a state that does tax Mega Millions winnings.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here are 8 U.S. states that don't impose taxes on lottery winnings. However, it is important to note that these states are still required to withhold federal taxes from your prize.
Wyoming
Wyoming will not tax your Mega Millions prize and is one of 13 states that won’t tax retirement income.
And if that wasn’t enough good news for residents, Wyoming has no personal or corporate income taxes and no estate or inheritance taxes. It's also been ranked by Kiplinger as a low-tax state for middle-class families.
Washington
Washington doesn’t impose a personal income tax and so won’t tax lottery winnings, including your Mega Millions prize, at the state level. However, the state's Supreme Court recently upheld a capital gains tax that has caused some controversy.
Additionally, last year, gas prices in Washington surpassed those in California, making them the highest in the U.S. for a while.
Texas
Texas is another state that won’t tax your lottery winnings. That’s good news for the ticketholder who matched five white balls and the Megaplier for a $4 million prize last summer.
According to lottery officials, "Texas has had more multi-million second-tier [Mega Millions] prizes than any other jurisdiction."
Tennessee
Residents of Tennessee do not have to pay taxes on their Mega Millions winnings, since the state doesn't have an income tax. The Volunteer State does have a high state sales tax, however, at 7%. When combined with local sales tax, the rate can be as high as 9.75%.
South Dakota
If you win a lottery jackpot in South Dakota, you won't have to pay any state tax on your winnings because the state does not have a personal income tax.
However, it is worth noting that the state and local sales tax rate is relatively low, but sales tax is applied to groceries and clothing.
New Hampshire
In New Hampshire, you won't have to pay state tax on your lottery winnings because the state doesn't have an income or sales tax.
However, it is important to note that property taxes are relatively high in New Hampshire and the state is phasing out its tax on dividends and interest income.
Florida
Florida also does not tax lottery winnings, so your Mega Millions prize will only be subject to federal taxes. Florida is also one of nine states that don't have a personal income tax. (That is great news for the $1.58 billion Mega Millions winning ticket sold last summer in the Sunshine State.)
Additionally, a massive tax relief bill in Florida enables residents to enjoy tax-free purchases on several items with six sales tax holidays.
California
If you win the Mega Millions jackpot in California, you will be happy to know that there are no taxes on lottery winnings in the state.
However, California has a reputation for high taxes partly due to the expensive prices of certain goods. Additionally, the Golden State has one of the highest sales tax rates in the United States and residents regularly face high gas taxes.
Related
-
December Fed Meeting: Live Updates and CommentaryThe December Fed meeting is one of the last key economic events of 2025, with Wall Street closely watching what Chair Powell & Co. will do about interest rates.
-
This Is Why Investors Shouldn't Romanticize BitcoinInvestors should treat bitcoin as the high-risk asset it is. A look at the data indicates a small portfolio allocation for most investors would be the safest.
-
I'm a Federal Benefits Pro: I Answer These 2 Questions a LotMany federal employees ask about rolling a TSP into an IRA and parsing options for survivor benefits, both especially critical topics.
-
Are You Middle-Class? Here's the Most Tax-Friendly State for Your FamilyTax Tips We found the state with no income tax, low property tax bills, and exemptions on groceries and medicine.
-
Social Security Benefits Quiz : Do You Know the IRS Tax Rules?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
How Are I Bonds Taxed? 8 Common Situations to KnowBonds Series I U.S. savings bonds are a popular investment, but the federal income tax consequences are anything but straightforward.
-
Capital Gains Tax Quiz: How Well Do You Really Know IRS Investment Tax Rules?Quiz Take our capital gains tax quiz to test your investment taxes knowledge. Learn about loss rules, holding periods, and tax incentives that could impact your savings.
-
6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)Retirement Taxes Here’s how converting your traditional retirement account to a Roth IRA can boost your nest egg — but avoid these costly scenarios.
-
Could Tax Savings Make a 50-Year Mortgage Worth It?Buying a Home The 50-year mortgage proposal by Trump aims to address the housing affordability crisis with lower monthly mortgage payments. But what does that mean for your taxes?
-
3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025Tax Deductions New charitable giving tax rules will soon lower your deduction for donations to charity — here’s what you should do now.
-
An HSA Sounds Great for Taxes: Here’s Why It Might Not Be Right for YouHealth Savings Even with the promise of ‘triple tax benefits,’ a health savings account might not be the best health plan option for everyone.
