United States — federal and state tax
Lottery winnings in the US are treated as ordinary income by the IRS. Federal withholding is 24% at the time of payment, but for large jackpots, winners fall into the 37% top bracket and owe additional tax at filing time. The gap between the 24% withholding and 37% top rate means most jackpot winners face a surprise tax bill in April.
State taxes add another layer. Nine US states have no income tax (including Florida, Texas, and Wyoming), making them popular retirement destinations for lottery winners. States with high lottery tax rates include New York (8.82%), New Jersey (10.9%), and Oregon (9.9%).
| State | State Tax Rate |
|---|---|
| California | 0% (no lottery tax) |
| Florida | 0% |
| Texas | 0% |
| Pennsylvania | 3.07% |
| Indiana | 3.23% |
| Arizona | 4.5% |
| Massachusetts | 5% |
| New York | 8.82% |
| Oregon | 9.9% |
| New Jersey | 10.9% |
Canada — completely tax-free
Canadian lottery winnings are not taxable. The Canada Revenue Agency treats lottery prizes as windfalls, not income — so you pay zero federal or provincial tax on your prize. This applies to all Canadian lotteries including Lotto Max and Lotto 6/49.
The catch: investment income earned on your winnings is taxable. If you invest your prize and earn dividends or interest, that income is subject to normal Canadian income tax rates.
United Kingdom — also tax-free
UK lottery winnings are completely free of income tax and capital gains tax. Whether you win £1,000 or £100 million on the National Lottery or EuroMillions, HMRC takes nothing from the prize itself.
However, large prizes may have inheritance tax implications if you pass money to family. Gifts over a certain threshold can trigger a 40% inheritance tax if the donor passes away within 7 years of making the gift. Estate planning advice is recommended for significant wins.
Australia — tax-free as well
Australian lottery winnings are not assessed as income by the Australian Taxation Office. Prizes from Oz Lotto, Powerball AU, Saturday Lotto, and other Australian lotteries are completely tax-free for the winner.
As in other tax-free jurisdictions, returns on invested prize money are subject to normal Australian income tax and capital gains tax rules.
Tax law changes regularly and individual circumstances vary significantly. This guide is for general information only. Always consult a qualified tax professional before making decisions about a lottery prize.
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