How much federal tax is withheld from lottery winnings?

1. What the law actually requires: the 24% automatic withholding

For U.S. taxpayers the payer — usually the state lottery agency — must withhold 24% of lottery, sweepstakes and similar gambling prizes when the net winnings exceed $5,000; that withholding is an upfront payment toward your federal income‑tax liability, not the final tax due ^{[1] [5]}.

2. Why 24% can be only a down payment — marginal rates matter

The 24% withheld is often smaller than the winner’s ultimate federal tax because large windfalls push ordinary taxable income into higher marginal brackets; for 2025 the top individual rate is 37%, so winners in the highest bracket will owe the difference when they file ^{[2] [6]}.

3. How lump sum versus annuity changes the tax timing

Taking a lump sum typically pushes most or all of the prize into one tax year, creating a large immediate tax bill and likely exposure to the top marginal rate; choosing an annuity spreads income across years and can keep annual taxable income — and effective tax hit — lower in some cases ^{[7] [8]}. Available sources do not provide a definitive rule that one option is always better — it depends on your other income, tax planning and state rules ^{[7] [8]}.

4. Nonresident winners and the 30% withholding rule

If you’re not a U.S. resident, federal withholding is commonly a flat 30% on gambling and lottery winnings, a higher immediate take than the 24% applied to residents; state withholding for nonresidents can also apply depending on where the ticket was purchased ^{[3] [4]}.

5. State and local taxes materially change your net

State and local tax rates differ dramatically: some states (and cities like New York City) add substantial withholding or tax on top of federal amounts, while other states impose no income tax; combined federal, state and local burdens can push the total tax bite well above half of a large jackpot in high‑tax jurisdictions ^{[3] [2]}.

6. Reporting, forms and recordkeeping winners should expect

Payers issue Form W-2G for reportable gambling winnings — that form documents the prize and any federal withholding and is used when filing Form 1040; winners who receive prizes under reporting thresholds may still need to report the income on their tax return ^{[9] [3]}.

7. Practical planning: withholdings, estimated tax and possible surprises

Because initial 24% (or 30%) withholding may be insufficient, winners frequently must make estimated‑tax payments or face a large balance due (and potential penalties) when they file. Financial and tax advisers often recommend consulting professionals before claiming or immediately after a win to plan withholding, charitable giving, gifting limits, and state residency questions ^{[1] [7]}.

8. What the major outlets and tax tools show about real examples

Recent coverage of jumbo jackpots illustrates the math: media and tax sites show the mandated 24% withheld from the cash option but then calculate that winners still owe additional federal tax up to the 37% bracket — for example, a large cash option reduced by 24% withholding still faces another roughly 13% of federal tax if the winner is in the top bracket ^{[6] [2]}.

9. Limits and disagreements in reporting

Reporting is consistent that 24% is the statutory withholding threshold for U.S. residents and 30% for many nonresidents, but sources differ in emphasis about state rules, and calculators and guides vary in exact state rates and in how they model lump‑sum versus annuity outcomes; readers should verify state withholding and final rates for their specific situation ^{[3] [4]}.

10. Bottom line for someone holding a winning ticket

Expect an automatic federal withholding of 24% if you’re a U.S. resident (30% for many nonresidents) on prizes over $5,000, but plan for additional federal tax — potentially up to the top marginal rate (37% in 2025) — plus state and local taxes; get professional tax and financial advice quickly to manage withholding, filing, and long‑term decisions ^{[1] [2] [3]}.

If you want, I can run example scenarios (lump sum vs annuity, different states, single vs joint filer) using numbers from these tax‑calculator sources to show likely take‑home amounts.