Massachusetts taxes lottery winnings at a flat 5% state income tax rate, and if your total taxable income for the year clears $1,107,750 in 2026, an additional 4% surtax applies to the amount above that line. Federal income tax applies on top, with 24% withheld on any prize over $5,000. Both the state and federal withholdings are prepayments, not your final bill, so what you actually owe is settled when you file.
The Flat 5% State Rate
Lottery winnings are Part B taxable income in Massachusetts and taxed at the state’s flat 5% rate. The rate is the same whether you hit a $20 scratch ticket, a Powerball jackpot, or a local raffle prize, and it does not change based on the size of the prize or your other income.
If you’re a Massachusetts resident, that 5% follows you regardless of where you bought the ticket. A winning ticket purchased on a trip to another state is still Massachusetts income to the Department of Revenue.
The 4% Surtax on Large Prizes
Since 2023, Massachusetts has added a 4% surtax on taxable income above an annually adjusted threshold. For 2026, that threshold is $1,107,750. Only the portion of your taxable income above it is taxed at the extra 4%, so the effective state rate on that slice is 9%.
A big prize collected in a single year can push you past the threshold on its own. If you earn $80,000 at your regular job and win $2 million, the 5% applies to all of your taxable income, and the extra 4% applies to everything above $1,107,750. The threshold adjusts for inflation, so expect a slightly different number in future years.
Federal Tax on Top
Federal income tax applies to lottery winnings as well. The IRS requires the lottery commission to withhold 24% of any prize over $5,000 before paying you, but that withholding is a down payment, not a settlement.
Your actual federal rate depends on total taxable income for the year, and 2026 brackets run from 10% up to 37%. A large prize can land you in the top bracket, which means you may owe considerably more than the 24% that was taken out at payout. You pay the difference when you file.
What Gets Withheld at Payout
The Massachusetts State Lottery Commission withholds 5% from any lottery prize of $600 or more. The federal threshold for withholding is higher: the IRS only requires 24% withholding when a lottery prize exceeds $5,000. A prize between $600 and $5,000 will have state tax taken out but no federal tax withheld at the source.
A prize under $600 isn’t tax-free. You still owe the 5% state tax (and federal tax at your bracket) on every dollar. The lottery just doesn’t withhold it for you, so it’s on you to report and pay when you file.
For non-lottery gambling winnings such as casino or sports betting payouts, federal 24% withholding kicks in when winnings top $5,000 and are at least 300 times the wager. Massachusetts still withholds 5% on those at the $600 mark.
Lump Sum Versus Annuity
Jackpot winners typically choose between a single lump-sum payment and annual installments over many years. Massachusetts taxes lottery income in the year you receive it or have the right to receive it. Taking the lump sum means the full amount is taxable in one year, which almost always triggers the 4% surtax and can push you into the top federal bracket. An annuity spreads the income across many years, so more of each payment can stay below the surtax threshold and in lower federal brackets.
The lump-sum figure is always less than the advertised jackpot because it reflects the present value of the annuity. Which option produces the better after-tax result depends on your other income, investment returns, and future rate changes, so this is worth talking through with a financial advisor before you decide, because the choice is irrevocable.
Can You Deduct Losing Tickets?
Not on your Massachusetts return. The state does not allow you to subtract the cost of losing lottery tickets from your winnings. The only ticket cost you can subtract is the price of the specific winning ticket itself.
Massachusetts does allow a narrow deduction for losses at licensed casinos operating under Chapter 23K and at licensed racing or simulcasting facilities, but it only offsets gains from those same kinds of establishments. It cannot be used against lottery income.
Federal rules are more forgiving. You can deduct gambling losses, including losing lottery tickets, on Schedule A, but only if you itemize and only up to the amount of gambling income you reported. Keep receipts, tickets, and statements.
Reporting Winnings on Your Massachusetts Return
You’ll get a Form W-2G from the lottery commission for any prize that hits the reporting threshold. The federal reporting threshold for certain gambling winnings is $2,000 starting in 2026. Box 1 shows total winnings; Box 15 shows Massachusetts tax withheld. Hang on to the form, because the Department of Revenue matches what you report against Lottery Commission records.
On Form 1, state lottery winnings go on Line 8b. Enter your net winnings, which is the prize minus the cost of the winning ticket, and don’t enter a number below zero. Winnings from another state’s lottery and other gambling income go on Schedule X, Line 3 instead. Keep them separate from Line 8b.
The state tax the lottery already withheld shows up in the payments section of Form 1 as a credit against what you owe.
When You Need to Make Estimated Payments
If withholding doesn’t cover what you’ll owe, Massachusetts expects quarterly estimated payments. The rule kicks in when the tax you expect on income that wasn’t fully withheld on exceeds $400. Missing those payments can lead to an underpayment penalty.
This comes up most often when a prize is large enough to trigger the 4% surtax but only 5% was withheld at payout. The gap can be significant. If you collect a big prize mid-year, consider making an estimated payment that quarter rather than waiting for April.
Group Winners and Pools
When a group shares a winning ticket, whoever claims the prize fills out IRS Form 5754 to identify each member and their share. The lottery commission then issues a separate W-2G to each person for their portion.
Massachusetts withholds 5% on the full prize when it hits $600 or more, even if any individual share would fall below that. The withholding is split proportionally, and each member reports their share and claims their piece of the withholding on their own return.
Non-Resident Winners
If you don’t live in Massachusetts but win a prize from the Massachusetts State Lottery, that money is Massachusetts source income. The commission withholds 5% from prizes of $600 or more no matter where you live.
Non-residents whose Massachusetts source income exceeds $8,000 (or the personal exemption amount after apportionment, whichever is less) must file a Massachusetts return on Form 1-NR/PY. Report the winnings on Line 10b. If your home state also taxes gambling income, check its rules for a credit covering tax paid to Massachusetts.
Debts That Come Out Before You’re Paid
Massachusetts can intercept lottery winnings to pay off certain debts before you ever see the check. Under state law, delinquent child support and debts owed to state agencies, including back taxes, are satisfied from your prize at collection. Child support comes first, then state tax liabilities. The Lottery Commission coordinates with the Department of Revenue and the child support enforcement agency to check for outstanding obligations before releasing payment.