Winning the lottery in any US state would be an absolute dream come true. Though what if we told you that the state you live in can make a significant difference to the percentage of the jackpot you’ll be taking home? From sea to shining sea, federal and state taxes differ across the country and it can certainly pay to win in California, where lottery wins have a 0% state tax rate, rather than New York, where 8.82% is deducted from lottery winnings. At LotteryCritic.com we used our Mega Millions and Powerball tax calculators to look at which states offer the highest payouts after tax, and which are home to the highest lottery wins of all time:
These 10 States Offer the Largest Lottery Payouts
There are 10 States in the United States which have a 0% tax rate for lottery wins: California, Delaware, Florida, Mississippi, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Assuming an average 61% cash payout from the jackpot, and a federal tax rate of 24%, winners in these ten states would take away 46.36% of the jackpot. This is great news for citizens of these states – especially for Floridians and Californians, who were found to hold the most winning tickets on the East and West Coast respectively.While New Yorkers certainly wouldn’t turn up their noses at a jackpot win, winners in this state are taxed more heavily, and would take away only 40.98% of the jackpot as payout. This means that the same $718,580,000 jackpot won by a Texan would be just $635,186,900 if won by a New Yorker. When the difference of more than $80 million could cover the cost of a luxury condo in Central Park, it might start to feel a little unfair. The difference is even more acute for winners who purchased the tickets within New York City, who can expect to be exposed to an additional city tax of 3.876% , taking a further $28 million from their winnings – there goes the once in a lifetime trip into Space with Jeff Bezos. Winners in Maryland, Washington D.C, Oregon, New Jersey, Wisconsin, Idaho and Minnesota are all similarly blighted with lottery taxes, bringing their jackpot takings to below 42%. While Maryland is the second worst state to purchase a lottery ticket, the news is slightly better for non-residents, who are taxed at a rate of 8%, rather than the 8.95% that applies to residents, bringing their overall tax rate in line with Oregon and Washington D.C. Non-residents in Maryland are treated rather better than visitors to the Grand Canyon State of Arizona who will find that they have to pay more than residents, being taxed 6% rather than 4.8% – so it doesn’t always pay to pick up a lottery ticket from the Hoover Dam gift shop.
Mega Millions Offers the Best Jackpot
The United States has two lotteries: the Mega Millions and the Powerball. The winnings from both are subject to state and federal taxes, so from a tax perspective there is no difference between the two. Rather, the best lottery to play will depend upon that lottery’s current jackpot. At the time of writing, Mega Millions has a jackpot of $1,550,000, overtaking Powerball’s $124,000,000, so would be the obvious choice. This hasn’t always been the case though, and in fact the largest lottery jackpot of all time was a Powerball win in November 2022, when a lucky Californian resident won a colossal $2,040,000,000 jackpot, scooping up $758,176,000 after taxes and a reduction for lump sum payment. The winning ticket was bought from Joe’s Service Station in Altadena and was so large that Californian officials didn’t have the appropriate signage – taping a ‘B’ onto signs that read ‘Millionaire made here’ so that they would read ‘Billionaire’.
Three of the largest Jackpots of all Time Have Been Won by Californians
It’s probably time that California invested in some more signs, because the Golden State has seen three lottery winners in the top ten largest wins of all time, with combined winnings of $1,159 million dollars. Coincidentally, all three of California’s big wins were on the Powerball.Out of the top 10 biggest prizes, six have been given by Powerball, and four by Mega Millions. The next Mega Millions drawing has the potential to enter this top ranking, as the jackpot is $1.55 billion dollars. In recent years, the top ten biggest lottery wins go from $326 million to $758 million, with the earliest being in 2017 and the most recent in July 2023. The largest win on the Mega Millions was in October 2018, when a South Carolinian purchased a ticket from a town called Simpsonville netting a jackpot of £1.5 billion, or $605,682,000 reduced for lump sum payment and after the federal taxes and the 7% state tax imposed by South Carolina. If the ticket had been purchased 40 miles away in North Carolina, where the state tax is lower, the winners would have scooped up an extra $39.4 million.
Annuity is the Best Option for Tax
Jonathan Merry, of LotteryCritic, has this advice for those hoping to avoid large deductions against their winnings: “If you want to receive the maximum jackpot prize it’s usually a good idea to opt for the annuity option, which awards the winner 100% of the jackpot – starting with one initial payment followed by index-linked annual payments over the following 29 years. The winnings are still subject to tax, but had the largest jackpot winner ($2.04 billion) opted for annuity he would have received $1.55 billion after taxes, rather than $758,176,000, making him a billionaire rather than a millionaire”. In this scenario it obviously pays to be patient and forward plan your finances. While the initial annual payments of $23,335,745 may not stretch to that Central Park condo, winners with a guaranteed multi-million dollar income for the next three decades will have no trouble accessing finance for those big purchases, and will be protected from the temptation to spend it all in one go.