You just won $500 million in Powerball. Here is the uncomfortable truth: you are not keeping $500 million. After lump sum reduction, federal taxes, and state taxes, most US winners take home roughly 37–52 cents on the dollar. This guide breaks down exactly what you keep — and what disappears before you ever see it.
Step 1: Lump Sum vs. Annuity
Every major US lottery jackpot is advertised as the annuity value — the total you would receive spread over 29 annual payments (30 years total). Almost all winners choose the lump sum (cash option) instead, which is typically 60% of the advertised jackpot.
| Advertised Jackpot | Lump Sum (≈60%) |
|---|---|
| $100 million | ~$60 million |
| $500 million | ~$300 million |
| $1 billion | ~$600 million |
| $2 billion | ~$1.2 billion |
The annuity option is not always worse. Each annual payment grows slightly (typically 5% per year), and it forces you to spread your tax hit over 30 years. But most financial planners recommend the lump sum for investing flexibility — so we will use lump sum for this analysis.
Step 2: Federal Taxes (37%)
Lottery winnings are ordinary income in the United States. Any prize over $5,000 triggers mandatory federal withholding of 24% at the time of payout. But jackpot winners fall into the top federal tax bracket (37% in 2026), so you will owe an additional ~13% at tax time.
Total federal tax on a large jackpot: approximately 37% of the lump sum.
Step 3: State Taxes (0–10.9%)
State lottery taxes vary enormously. Eight states have no state income tax on lottery winnings at all. Others take a significant bite:
| State | Lottery Tax Rate |
|---|---|
| California, Florida, Texas, Nevada, Washington | 0% (no state income tax) |
| Pennsylvania | 3.07% |
| Colorado | 4.4% |
| Illinois | 4.95% |
| Georgia | 5.75% |
| Ohio | 3.99% |
| Massachusetts | 5% |
| Michigan | 4.25% |
| New Jersey | 10.75% |
| New York | 10.9% |
| Maryland | 8.75% |
| Minnesota | 9.85% |
Note: some states also add local/city taxes. New York City winners pay an additional 3.876% city income tax on top of the state rate.
Full Example: $500 Million Jackpot
| Step | California Winner | New York Winner |
|---|---|---|
| Advertised Jackpot | $500,000,000 | $500,000,000 |
| Lump Sum (60%) | $300,000,000 | $300,000,000 |
| Federal Tax (37%) | −$111,000,000 | −$111,000,000 |
| State Tax | $0 (no CA lottery tax) | −$32,700,000 (10.9%) |
| You Keep | ~$189,000,000 | ~$156,300,000 |
California is the best state to win a lottery jackpot in the US — no state tax on lottery prizes. New York is one of the worst, with both state (10.9%) and potential NYC (3.876%) taxes.
Smaller Prizes: What Gets Withheld
Not every win triggers the same tax treatment:
- Under $600: No withholding, no reporting requirement — you keep all of it.
- $600–$5,000: Must be reported as income on your tax return, but no automatic withholding.
- Over $5,000: 24% federal withholding is automatically deducted before you receive the check.
- Over $600 (state varies): Most states also withhold their portion before payout.
International Lottery Taxes
International lotteries treat winnings very differently:
| Country / Game | Tax on Prizes |
|---|---|
| UK (UK Lotto, EuroMillions) | 0% — prizes are completely tax-free |
| Ireland (Irish Lotto) | 0% — tax-free |
| Canada (Lotto Max, 6/49) | 0% — tax-free (federal) |
| Australia (OzLotto, AU Powerball) | 0% — tax-free |
| Germany (EuroJackpot) | 0% — tax-free |
| France (EuroMillions) | 0% — tax-free |
| Brazil (Mega-Sena) | 30% withholding tax |
| South Africa (SA Powerball) | 0% — tax-free |
If you live in the US and win a foreign lottery (via theLotter or similar service), US tax law still applies to your worldwide income. You would owe US federal taxes on the prize even if the country of origin charges nothing.
Can You Reduce the Tax Hit?
Legally, yes — though options are limited for most winners:
- Take the annuity: Spread income over 30 years; some years may fall below the top bracket if you have no other income.
- Charitable giving: Donating up to 60% of your AGI to qualified charities is deductible, reducing taxable income in the year you win.
- Move before claiming: If you live in a high-tax state, some winners establish residency in a no-tax state before claiming. This requires genuine relocation — simply renting an apartment is not enough.
- Qualified opportunity zones and trusts: Complex structures that require a tax attorney and accountant working together; worthwhile at jackpot levels, overkill for smaller wins.
The Takeaway
A $100 million US jackpot turns into roughly $38–57 million after taxes depending on your state. That is still life-changing money. But the advertised headline number is always significantly larger than what you deposit in your account. Planning ahead — especially understanding your state's tax rate — is the first step for any serious lottery player.