Federal tax on lottery winnings: 24% withheld, 37% owed
The IRS withholds 24% of any lottery prize above $5,000 at the moment of payout. That number is a deposit, not a final bill. A Powerball or Mega Millions winner is in the top 37% federal bracket, and the 13% gap between what was withheld and what is actually owed comes due in April.
Withheld at source
24%
IRS auto deduction on any lottery prize above $5,000.
Actually owed
37%
Top federal bracket. Every lottery jackpot pushes the winner here.
The gap, due April 15
13%
The surprise bill most winners do not see coming.
Worked example: the current $302M Powerball jackpot
For a single filer in a no state tax state, the federal math on the current Powerball jackpot looks like this:
Step
Advertised jackpot
$302M
Lump sum cash option (45.5%)
$137.4M
IRS withholding (24% at source)
$33.0M
Additional owed in April
$17.8M
Total federal tax (36.97% effective)
$50.8M
State tax may apply on top of these federal numbers. See the state pages for the full breakdown.
IRS 2026 federal tax brackets, single filer
Lottery winnings are taxed as ordinary income, which means the same progressive brackets that apply to wages. A Powerball or Mega Millions lump sum is large enough to fill every bracket from 10% all the way to 37%, so the effective rate sits very close to the top 37% but is not literally 37% on every dollar.
| From | To | Rate |
|---|---|---|
| $0 | $12,400 | 10% |
| $12,400 | $50,400 | 12% |
| $50,400 | $105,700 | 22% |
| $105,700 | $201,775 | 24% |
| $201,775 | $256,225 | 32% |
| $256,225 | $640,600 | 35% |
| $640,600 | and above | 37% |
Other filing statuses use different bracket thresholds. The 37% top rate is identical across all four statuses.
Why the 24% withholding is intentionally low
The 24% withholding rate is set in IRS Publication 525 and was last adjusted in the 2017 tax law. The IRS sets it conservatively low so that no winner receives a refund at the lottery line, only a balance due at filing. From the IRS perspective, this is intentional: lottery payouts come in large discrete events, and an aggressive withholding rate would generate refund obligations the agency would rather avoid. From the winner perspective, the 24% withholding can create the illusion that the federal hit is smaller than it actually is.
How the progressive brackets actually work
Federal tax in the United States is progressive, not flat. A lottery winner does not pay 37% on every dollar of the lump sum. The first $11,600 is taxed at 10%, the next slice at 12%, and so on up the bracket ladder. Only dollars above the $609,350 threshold are taxed at 37%. The result is an effective rate that sits a few tenths of a percent below 37%, depending on the size of the prize. On a $100 million lump sum, the difference between the effective rate and the top rate is around $100,000. On a $1 billion lump sum, the difference shrinks to a rounding error.
How state tax stacks on top of federal
State lottery tax applies after federal tax in the cash flow but is calculated on the same lump sum cash value, not on the post federal amount. State rates range from 0% in 9 states to over 10% in New York, New Jersey, and Washington DC. The state tax line is independent of the federal bracket math; it is a flat percent of the lump sum applied at the state revenue department. A winner in a high tax state can lose more than 50% of the advertised jackpot to combined federal plus state tax once the annuity to lump sum discount is also applied.
Federal lottery tax FAQs
What is the federal tax rate on lottery winnings?
Federal tax on lottery winnings can reach 37%, the top marginal bracket. The IRS withholds 24% upfront on any prize above $5,000, but the additional balance up to the 37% top rate comes due in April. The effective federal rate on a Powerball or Mega Millions lump sum is typically 36 point something percent, very close to the top 37% but slightly below it because of the progressive bracket structure.
Why does the IRS only withhold 24% if I owe 37%?
The 24% withholding rate is set in IRS Publication 525 and is intentionally conservative. The agency would rather collect the balance at filing time than issue a refund. The 13% gap between what is withheld and what is owed creates a large April bill that catches most winners by surprise.
Are lottery winnings taxed at a flat 37%?
No. Lottery winnings are taxed as ordinary income at progressive bracket rates. The first dollars of the prize fall in the 10% and 12% brackets, the middle in 22% and 24%, and only the dollars above $609,350 land at the 37% top rate. The effective rate on a multi million dollar lump sum is very close to 37% but technically sits a few tenths of a percent below it.
Can a winner reduce federal tax by donating to charity?
Yes, with limits. Charitable deductions can offset some of the federal tax bill, but the deduction is capped at 60% of adjusted gross income for cash gifts to public charities, and lower percentages for other gift types. A winner who routes part of the prize through a donor advised fund or a private foundation can shift the timing of the deduction, but cannot reduce the total federal tax to zero on the year the prize is claimed. Consult a tax attorney before a major lottery win for the specific structures available.