How much do you pay in tax on California lotto winnings
Executive summary
California does not tax winnings from the California State Lottery, so state tax on in-state lottery prizes is zero; winners still must report the prize as federal taxable income and face IRS withholding of 24% on prizes over $5,000 and potentially higher final federal tax liability up to 37% depending on total income [1] [2] [3]. Some non‑resident and noncitizen withholding rules (30%) and variations in reporting or withholding across states mean your final take‑home depends on filing status, residency and whether you choose lump sum or annuity [2] [4].
1. California’s surprising rule: the state won’t tax California Lottery prizes
The California Franchise Tax Board says plainly: “We do not tax winnings from the California Lottery,” including major games such as SuperLotto, Powerball and Mega Millions — so California does not impose a state income tax on prizes won in‑state [1]. Multiple tax guides and outlets confirm California is among the states that do not levy state tax on lottery winnings [5] [6].
2. Federal bite: immediate withholding and final tax can diverge
At the federal level the IRS treats lottery prizes as taxable income. Federal agencies and tax guides note a 24% withholding on prizes over $5,000 that lottery payors remit up front, but that withholding is an initial credit — your actual federal tax bill may be higher, potentially subjecting portions of the prize to rates up to 37% once you file based on total taxable income and filing status [3] [2] [7].
3. Non‑residents and noncitizens face different withholding
If you are not a U.S. citizen or resident, sources indicate a higher flat withholding rate (commonly cited as 30%) may apply to lottery prizes unless a tax treaty reduces it; calculators and guidance pages highlight this distinction when estimating take home from a win [4] [2].
4. Lump sum vs annuity: timing changes the tax story
Choosing cash (lump sum) or annuity affects when income is reported and taxed. Lump sums are taxed in the year received and can push you into higher tax brackets immediately, while annuities spread taxable income across years and may reduce exposure to the top marginal rate in any single year [2].
5. Withholding won’t always cover your full federal bill
News and tax calculators emphasize that the default 24% federal withholding often under‑pays the eventual tax liability for large jackpots; winners frequently still owe additional federal tax when they file, because the progressive bracket system taxes portions of income at higher marginal rates — up to 37% — depending on total taxable income [7] [3].
6. Reporting and deductions: what you can and can’t offset
Winnings must be reported as income on federal returns. California FTB guidance notes state does not tax the prize itself but that federal adjusted gross income (which includes gambling winnings) is reported on the California return; gambling losses can be claimed as an itemized deduction up to the amount of winnings, subject to the usual itemization rules [1].
7. Where sources disagree and why it matters
Most official and high‑quality sources in the results consistently state California does not tax California Lottery winnings [1] [6] [5]. Some commercial tax‑advice pages or calculators emphasize state taxes more generally or present contradictory phrasing about California taxing winnings — these likely conflate taxation of gambling income by residents generally or misread how California reports federal AGI on state forms [8] [9] [10]. Readers should prioritize the California FTB guidance [1] and well‑sourced tax outlets for the clearest statement on state tax treatment.
8. Practical takeaway and next steps for winners
If you win a California Lottery prize, expect federal withholding (24% for most prize amounts above reporting thresholds) and possible additional federal tax when you file; do not expect California to take a state income tax bite on the prize itself [1] [3]. Consider engaging a CPA and a tax attorney to model lump‑sum vs annuity outcomes, confirm nonresident or treaty withholding if applicable, and plan withholding or estimated payments to avoid surprises [2] [4].
Limitations: this summary relies on the provided sources and does not substitute for personalized tax or legal advice; the FTB statement that California does not tax state lottery winnings is the authoritative position reflected in the reporting used here [1].