Winning the lottery, especially a billion-dollar Powerball, is a dream. But depending on where you live, you’re unlikely to receive all the money. The Internal Revenue Service (IRS) wants its share and in most states, the tax man also takes a significant bite.
As far as the IRS is concerned, lottery winnings are taxed as ordinary income, and more than likely winning the lottery will put you in a higher tax bracket. Taking the full amount in a lump sum will send more money to Washington than if you choose to take annual payments in the form of an annuity.
Many states, on the other hand, tax lottery winnings differently. Here are the 10 worst states to live and the tax rate they assess if you get lucky.
| New York | 8.82% |
| Maryland | 8.75% |
| New Jersey | 8% |
| Oregon | 8% |
| Wisconsin | 7.65% |
| Minnesota | 7.25% |
| Arkansas | 7% |
| South Carolina | 7% |
| Connecticut | 6.99% |
| Idaho | 6.93% |
The best states for lottery winners
The state with the lowest tax rate on lottery winnings is North Dakota, which only takes a 2.9% cut. But it isn’t the best place to cash in on the lottery. There are eight states that levy no tax on your lottery winnings.
- California
- Florida
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
What if you live in one state but win another state’s lottery? According to TaxAct.com, most states don’t withhold taxes on non-residents, to avoid double taxation. However, Arizona and Maryland are the two exceptions.
Can we keep this a secret?
If you’d like to keep your good fortune a secret, 18 states allow for some form of anonymity, depending on the size of the prize.
- Arizona
- Delaware
- Georgia
- Illinois
- Kansas
- Maryland
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- New Jersey
- North Dakota
- South Carolina
- Texas
- Virginia
- West Virginia
- Wyoming