States With the Highest Powerball Taxes
If you end up with the winning Powerball numbers, these states will take the biggest tax bite out of your payout.
Powerball numbers are on many people's minds since the jackpot soared again (it stood at $1.326 billion for the April 6 winning ticket) following another recent Powerball lottery jackpot prize of $1.76 billion. Powerball excitement includes the prospect of winning big — and, unfortunately, paying some taxes on that prize.
Although some states won’t tax your Powerball winnings, many states will, and some have higher tax rates than others.
Powerball after taxes: Highest lottery tax states
Here are the states with the highest lottery tax rates. (It is important to note that you will also pay federal taxes on your Powerball prize. Generally, 24% comes off the top for federal income tax. You will likely pay additional tax on your income when you file your return at a rate that depends on your income tax bracket.)
Sign up for Kiplinger’s Free E-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.
Related: Powerball Jackpot Winner Will Get a Hefty Tax Bill
New York
New York state tax rate on lottery winnings: 10.90%
According to New York state law, If the proceeds from your lottery win are $5,000 or less, the prize payment isn’t considered New York source income. So smaller prize money amounts won’t be subject to New York income tax. (In New York, “proceeds” are the total amount of the prize minus the cost of the winning ticket.)
Note: A Powerball ticket costs $2 per play.
Maryland
Maryland tax rate on lottery winnings: 8.75%
Maryland will deduct 8.95% of state tax if you’re a resident and your prize exceeds $5,000. If you’re a non-resident, the state tax withholding rate on your lottery winnings will be 8%.
Remember, the state tax is in addition to the 24% initial withholding for federal taxes. Also, you are required to report your lottery winnings on your tax return since the Maryland lottery says prizes from $601 to $5,000 may be taxable.
Washington, DC
Washington, DC tax rate on lottery winnings: 8.5%
Washington, DC, isn't a state. However, according to the District of Columbia’s Office of Lottery and Gaming, winnings over $5,000 are subject to an 8.5% tax rate for District income tax.
However, under Washington DC regulations, all lottery winnings that exceed $600 are reported to the District Office of Tax and Revenue.
Honorable Mentions: Oregon and New Jersey
Oregon tax rate on lottery winnings: 8%
Oregon withholds an 8% state tax on lottery prizes of $1,500 or more. So, your lottery prize payout comes minus the 8% state tax. The state reminds taxpayers that any large lottery prize is considered taxable income.
However, the Oregon Lottery provides guidance on its website regarding lump sum vs. annuity payouts and taxes. “An annuity option pays out a larger amount of dollars over 30 years, but each annuity payment would be subject to tax. A one-time lump sum cash payment pays out less overall but, as it comes in a single payment, gets taxed at payout.”
New Jersey tax rate on lottery winnings: Up to 8%
According to the state’s lottery, New Jersey taxes lottery prizes of more than $10,000 and up to $500,000 at a rate of 5%. But since we’re talking about a massive Powerball jackpot, the state’s higher 8% withholding tax rate applies to a lottery prize greater than $500,000.
Winners receive a Form W2-G at the end of the year. That form shows the amount of lottery prize winnings that should be reported as income and the amount of federal and state taxes withheld.
Powerball numbers
To win the Powerball jackpot, you must match six numbers from the Powerball drawing. The drawing takes place every Monday, Wednesday, and Saturday at 10:59 p.m. ET.
You can find the winning numbers from the last drawing on Powerball's website. If no one matches all six numbers, the Powerball rolls, and the jackpot amount increases.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
Come as You Are: Wealth Management for Gen X
Gen X is stuck in the middle of kids and aging parents, but retirement's not far off. Time to prioritize, with help from Nirvana, The Eagles and David Bowie.
By Alvina Lo Published
-
New Job? Time to Start a 401(k) Plan
Whether you're starting a new job or have never opened a 401(k) account, it's time! Here's how to open an account in five steps.
By Adam Shell Published
-
Six Tax Deadlines for October 15
Tax Deadlines You might know about the federal tax return extension deadline, but did you know about these other tax deadlines for Oct. 15?
By Kate Schubel Published
-
IRS Sued for Millions Over Employee Retention Credit (ERC) Delays
Tax Credits The pandemic-era tax refunds for businesses have been a contention point for the agency, now employers are fighting for their cash.
By Gabriella Cruz-Martínez Published
-
Hurricane Helene Aftermath: IRS Tax Relief and How to Help
Tax Relief Following the destruction in the southeast U.S., IRS officials and several states have extended tax deadlines for affected taxpayers. Here are the payments and filings that qualify.
By Kate Schubel Last updated
-
New Jersey Ends Sales Tax Break for EVs: What to Know
State Tax Discover alternative savings now that New Jersey is phasing out its sales tax exemption on EVs.
By Kate Schubel Last updated
-
Landmark Lawsuit Targets Unfair NYC Property Taxes
Property Tax New York’s highest court just weighed in on the city’s embattled property tax code. Here's what it could mean for you.
By Gabriella Cruz-Martínez Last updated
-
IRS Solar Tax Credit Payouts Soar as Scams Target Homeowners
Clean Energy Clean energy tax credits are paying off for many, but experts warn of increasing scams.
By Kelley R. Taylor Last updated
-
Arizona Pickleball Taxes? What You Need to Know
State Tax The popular sport is sparking debate in some communities. Could you be subject to ‘pickleball taxes’?
By Kate Schubel Last updated
-
Capital Gains in Retirement: Managing RMDs, Taxes, Social Security and Medicare
Capital Gains Capital gains tax can significantly impact your funds and financial planning for retirement.
By Kelley R. Taylor Last updated