One of the aspects you shouldn’t neglect when thinking of getting your Powerball entries is the one after winning. You will have to pay Powerball taxes in US: a federal rate of 24% to 30%, a state tax + a local tax. However some states are having lower amounts than others. Find out more about how much your winnings might get taxed right below.
Do Indian Citizens Pay Powerball Taxes?
Lottery winnings are taxable in India, including winnings scooped on online platforms. Under the Finance Act of 1986 and Income Tax Act, lottery winnings are subject to a flat 30% rate. There is an extra percentage surcharge for winnings over a set amount and a further 3% ‘Cess’ charged for improving education and health care in India.
However, according to the tax treaty between USA and India, double taxation should be avoided. This means that you will most likely pay taxes in the US, but if there is any tax rate difference in India, you may have to pay the difference.
Make sure to contact a financial expert or tax advisory before collecting your prize.
What Are the Applicable Powerball Taxes?
Federal Taxes
The federal tax is between 24% and 30% depending on whether you are residing in the United States or not. Residents pay 24% while non-residents pay 30% federal tax. This means tourists pay more than residents.
State Taxes
First, it is important to mention that some states (such as New Hampshire or Florida) don’t apply this tax to lottery winnings. However, some tax up to 10.9%! This is the case of New York for instance.
Local Taxes
Local taxes might be applicable in your case. Local taxes are the fees required by the county or municipality where you reside. We advise you to seek the advice of a professional tax advisor when you win.
How Are American Lottery Prizes Taxed?
- Winnings < $600 – if you win less than $600 at an American lottery, you won’t have to pay taxes on your winnings, in the States
- Winnings > $600 – if you win more than $600, then you will have to pay the federal rate first (24% for residents and 30% for non-residents) to which there might be a state or city tax to add.
How Much Does Powerball Get Taxed in US?
The US federal government takes 24 to 30% of big winnings on Powerball prizes:
- 24% for a US resident
- 30% for those not residing in the States
However, some states (but not all) also have a state tax that you will need to pay after the federal one.
Federal Tax on Powerball winnings
Are You Residing in the United States? Before you start playing Powerball online, you should know that the United States apply a different federal rate depending on whether you are a resident or a foreigner . This is yet another proof that the immigration status of the winner does not matter in order to buy a Powerball ticket & win. Some cities can also add their own local tax, as is the case in Arizona for instance.
- Taxes for residents: Federal rate (24%) + state rate + local rate.
- Taxes for non-residents: Federal rate (30%) + state rate + local rate.
Powerball States Taxes
State taxes can range from approximately 0% to 10.9%, and are applied after the federal rate. The exact percentage depends on the issuing state of the winning ticket in question. Some jurisdictions, for their part, do not apply additional state taxes.
On the map below, you can visually see which states have higher taxes and which are having lower state taxes:
Here is a table with the updated rates of each US state:
| State | Tax |
|---|---|
| Arizona | 4.8% for residents |
| 6% for non-residents | |
| Arkansas | 5.9% |
| California | – |
| Colorado | 4% |
| Connecticut | 6.99% |
| Delaware | – |
| Florida | – |
| Georgia | 5.75% |
| Idaho | 6.925% |
| Illinois | 4.95% |
| Indiana | 3.23% |
| Iowa | 5% |
| Kansas | 5% |
| Kentucky | 5% |
| Louisiana | 5% |
| Maine | 5% |
| Maryland | 8.95% for residents |
| 8% for non-residents | |
| Massachusetts | 5% |
| Michigan | 4.25% |
| Minnesota | 7.25% |
| Mississippi | 3% – 5% |
| Missouri | 4% |
| Montana | 6.9% |
| Nebraska | 5% |
| New Hampshire | – |
| New Jersey | 5% – 8% |
| New Mexico | 6% |
| New York | 10.9% |
| North Carolina | 5.5% |
| North Dakota | 2.9% |
| Ohio | 4% |
| Oklahoma | 4% |
| Oregon | 8% |
| Pennsylvania | 3.07% |
| Puerto Rico | – |
| Rhode Island | 5.99% |
| South Carolina | 7% |
| South Dakota | – |
| Tennessee | – |
| Texas | – |
| Vermont | 6% |
| Virginia | 4% |
| Washington | – |
| Washington, D.C. | 8.5% |
| West Virginia | 6.5% |
| Wisconsin | 7.65% |
| Wyoming | – |
Powerball Taxes and Ways Of Collecting Your Prize
If you scoop big at the Powerball lottery, the way you choose to collect your winnings will influence the amount of tax you will end up paying, here’s how:
Lump Sum Payment
With this option, players receive their winnings as “Cash Value”. The prize is taxed according to what we mentionned above: federal taxes of 24% for residents or 30% for non-residents + state taxes (to which local taxes may be added for players who don’t live in the States). It is pretty straightforward.
Annuity
When choosing the annuity option, players receive their winnings over 29 years, in 30 installments. Powerball taxes are recalculated every year as each state may recalculate their fees, due to inflation. This also means that there is no way to know in advance how much you will end up paying as Powerball taxes.
Powerball Taxes FAQ
The US federal government takes 24 to 30% of US lottery winnings.
You start paying Powerball taxes in US when your winnings exceed $600. Federal rate (24% for residents & 30% for non-residents) + state tax + local tax.
Yes, the federal tax on lottery winnings is of 24% for residents and 30% for non-residents. State taxes may also be slight different for players that do not live in the state where the winning ticket was purchased.
Only if you have to claim your prize in person will you need to travel to the United States. If you win a smaller amount on LottoSmile, it will be directly transferred to your account (- the taxes that will already be deducted). If you win a large prize, you may have to travel to collect it in person. LottoSmile will be by your side every step of the way.
You will need to pay the United States Government taxes (30% federal tax for non-residents + state taxes).
As for those established in India, in principle, you will not have to pay taxes to India thanks to the double taxation treaty of both countries, but you may have to pay the difference if India taxes would have been more extensive than the US ones. We advise players to consult a tax advisor.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as a taxation advice and readers are advised to seek independent professional advice.