Win the lottery? Where you’ll lose the most to taxes – AOL

(NEXSTAR) – You’ve picked the right numbers, you’ve overcome the odds, and now you’ve won the lottery. Presumably, you’re due for a massive payout, scrawled across one of those large checks. 

That is, until the taxman comes.

Even the largest lottery prizes in the U.S. have been cut down by taxes. In 2022, a California man won a $2.04 billion Powerball jackpot and opted for the $997.6 million cash payout. After the federal lottery tax of 37%, his payout works out to about $977.3 million – a deduction of about $20.4 million. 

Luckily, that Powerball player bought his ticket in California, a state that does not impose a tax on lottery winnings. Only eight other states – Delaware, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming – do not have a lottery tax. 

The same can’t be said for other participating states. 

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An analysis by MoneyLion found that state lottery taxes range between 1.95% in North Dakota and 10.9% in New York. 

The nine-point difference can, of course, make a difference. 

Let’s say the jackpot is $100 million, with a cash value of $55 million. 

A player in California, or any of the other states without a local lottery tax, would only be subjected to the federal rate of 37%, per MoneyLion’s analysis. That would leave them with a lump sum payout of about $34.7 million, or slightly more than $63 million after 30 years of annuitized payments. 

In North Dakota, with its less-than-2% state lottery tax, that payout would be about $33.6 million for the lump sum or $61.1 million for the annuity option, according to MoneyLion. 

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Alternatively, in New York, the same winner would walk away with about $28.7 million for the cash payout, or $52.1 million after all 30 annuitized payments. 

The map below, built with MoneyLion’s report, shows how local tax rates vary across the U.S.

On a smaller jackpot, the tax withholdings may feel more noticeable than, say, the aforementioned record-setting $2.04 billion Powerball jackpot. 

Had the lucky winner bought their ticket in North Dakota, their payout would have been knocked down slightly to $976.2 million. In New York, the same prize would have been closer to $971.3 million, according to MoneyLion’s calculations. 

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While you do not have to be a resident of a state (or even the U.S.) to play the lottery, it’s not necessarily advantageous to buy tickets where there is no local lottery tax. As the Minnesota Lottery warns, lottery winnings are treated like wages in many states, which means you may face additional tax withholdings anyway. 

Regardless of where you win the lottery, if the jackpot is large enough to take your breath away, experts recommend signing the back of your ticket, keeping it secure, and building a team around you to help navigate your newfound wealth. That includes consulting an attorney, tax advisor, and financial advisor.

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