Yes, Delaware taxes lottery winnings as ordinary income for state residents, with rates climbing to 6.6% on income above $60,000. Federal tax applies on top of that, up to 37%. Non-residents who buy a winning ticket in Delaware get an unusual break: the state’s tax code does not list lottery winnings as Delaware-sourced income, so most out-of-state winners owe nothing to Delaware beyond the mandatory federal withholding.1Delaware Code Online. Delaware Code Title 30 – Personal Income Tax – Nonresident Individuals
What Delaware Residents Owe
Delaware starts its tax calculation from your federal adjusted gross income, and because the IRS already counts lottery winnings as taxable income, those winnings flow straight into your state return.2Delaware Code Online. Delaware Code Title 30 – Personal Income Tax – Resident Individuals The Delaware Lottery states plainly that all winning Delaware Lottery tickets are subject to Delaware income tax.3Delaware Lottery. FAQs
The state’s graduated brackets apply to your combined income for the year:4Division of Revenue – State of Delaware. Tax Rate Changes
- First $2,000: 0%
- $2,000–$5,000: 2.2%
- $5,000–$10,000: 3.9%
- $10,000–$20,000: 4.8%
- $20,000–$25,000: 5.2%
- $25,000–$60,000: 5.55%
- Over $60,000: 6.6%
For any meaningful prize, most of the winnings fall into the 6.6% top bracket. A resident earning $50,000 in wages who wins a $100,000 prize would owe $2,943.50 on the first $60,000 of total income and 6.6% on the remaining $90,000.
Federal Tax on Top
The IRS treats lottery winnings as ordinary income, no different from wages, and stacks them on your other income for the year.5Internal Revenue Service. Topic No. 419, Gambling Income and Losses Federal rates for 2026 top out at 37%, which kicks in at $640,600 for single filers and $768,600 for married couples filing jointly.6Tax Foundation. Federal Income Tax Brackets and Rates
A lump-sum payout concentrates the entire prize into one tax year, which almost guarantees a large jackpot winner lands in that top bracket. The annuity option spreads the prize across 30 annual payments, each taxed in the year received. That keeps some payments in lower brackets, though each installment on a major jackpot is usually still large enough to reach near the top rate.
The lottery issues IRS Form W-2G showing your winnings and the federal tax already withheld. You report the full gross amount on Form 1040 using Schedule 1, even when withholding has already covered part of the bill.5Internal Revenue Service. Topic No. 419, Gambling Income and Losses
Withholding and Estimated Payments
For any Delaware Lottery prize over $5,000, the state withholds 24% for federal income tax before cutting your check.3Delaware Lottery. FAQs That requirement comes from federal law covering state-conducted lottery proceeds above that threshold.7Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source The 24% is a prepayment. If your income puts you in the 37% bracket, you owe the difference when you file.
Delaware itself withholds no state income tax from lottery winnings.3Delaware Lottery. FAQs You get a larger upfront payment than winners in states that withhold for both, but you take on the responsibility of setting aside money for the state bill.
If you expect to owe more than $800 in Delaware income tax beyond what’s already withheld from wages or other sources, you must file quarterly estimated tax payments. A lottery winner with no offsetting employer withholding will blow past that threshold easily. The penalty for underpayment is 1.5% per month on the shortfall, so delaying gets expensive fast.8Delaware Division of Revenue. Declaration of Estimated Income Tax for Individuals
If You Live Outside Delaware
Delaware’s tax code defines non-resident Delaware-sourced income to include wages earned in the state, business income, real estate gains, and winnings from pari-mutuel wagering conducted in Delaware. Lottery winnings are not on that list.1Delaware Code Online. Delaware Code Title 30 – Personal Income Tax – Nonresident Individuals The Delaware Lottery’s own FAQ reinforces the point: after noting that winning tickets are subject to Delaware income tax, it adds that a non-resident’s home state “may tax your winnings,” without claiming Delaware itself will.3Delaware Lottery. FAQs
In practice, a non-resident who buys a winning Delaware ticket pays the 24% federal withholding at claim time but generally owes no Delaware state tax. You then report the income on your home state’s return and pay whatever rate that state charges. Winners from the handful of states with no income tax come out even further ahead.
If You Live in Delaware and Buy Elsewhere
Delaware residents owe state tax on lottery winnings no matter where the ticket was purchased, because the state’s taxable income starts from your full federal adjusted gross income.2Delaware Code Online. Delaware Code Title 30 – Personal Income Tax – Resident Individuals A Mega Millions ticket bought across the line in Maryland still generates a Delaware tax bill. If the other state also taxes the winnings, you can typically claim a credit on your Delaware return for taxes paid there, which prevents double taxation on the same income.
Deducting Gambling Losses
Federal law lets you deduct gambling losses, but only up to the amount of your gambling winnings for the year, and only if you itemize. You report the full winnings as income and claim the losses separately on Schedule A.9Internal Revenue Service. Five Important Tips on Gambling Income and Losses
Starting in 2026, new federal legislation caps the deduction at 90% of your gambling losses rather than the full amount. If you had $10,000 in documented losses against $50,000 in winnings, you previously could deduct the entire $10,000; under the new rule, only $9,000 qualifies. Casual players with small losses barely notice. Frequent gamblers with large yearly losses face taxable “phantom income” on losses that are real but no longer fully deductible.
The deduction only pays off if your itemized total beats the standard deduction, which for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly.10Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Keep detailed records: losing tickets, account statements from online platforms, and a log of dates, locations, and amounts. Lottery and sportsbook operators report your winnings to the IRS, but not your losses.
Two Other Things Worth Knowing
Delaware is one of the few states that lets lottery winners stay fully anonymous regardless of the prize amount. There is no public-disclosure threshold, so you can claim without your name or city being released.
You have one year to claim a winning ticket from a Delaware Lottery drawing game, measured from the drawing date. For instant (scratch-off) games, the one-year clock runs from the announced end-of-sales date for that specific game, not from when you bought or scratched the ticket.11Delaware Lottery. Claim Prizes Miss the deadline and the prize is forfeited.