Win a large prize in New York and you can lose more than half of it to taxes. NY lottery tax rates stack three layers: federal income tax up to 37%, New York State income tax up to 10.90%, and, if you live in New York City or Yonkers, a local tax of 3.876% or 1.82575%. A New York City resident at the top of the brackets faces a combined marginal rate of 51.776%. That makes the Empire State one of the most heavily taxed places in the country to hit a jackpot.
The withholding you see at claim time doesn’t match the final bill. Understanding the gap is the difference between a comfortable April and a crisis.
Federal Tax: 24% Withheld, Up to 37% Owed
The New York Lottery withholds federal income tax at a flat 24% on any prize over $5,000 before paying you.1Internal Revenue Service. Instructions for Forms W-2G and 5754 On a $1 million prize, $240,000 goes straight to the IRS.
That 24% is only a down payment. Your real federal rate depends on your total taxable income for the year, lottery prize included. For 2026, the top federal marginal rate is 37%, which starts at $640,600 for single filers and $768,700 for married couples filing jointly.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Any sizable jackpot blows past that threshold, which means you owe another 13 percentage points on the portion taxed at the top bracket. On a $10 million prize, that gap is roughly $1.3 million in federal tax still due when you file.
Winners get into trouble here. The withholding feels like the tax is handled. It isn’t. Spend freely for a few months without setting aside the difference and the April bill can be catastrophic.
New York State Tax: 10.90% Withheld
New York State adds its own withholding on prizes over $5,000, no matter where the winner lives. The state rate is 10.90%, deducted before the Lottery hands over the check.3New York Lottery: Official Site. General Guidelines Combined with the 24% federal withholding, 34.90% is gone before you see the money.
The 10.90% rate matches New York’s top marginal income tax rate, which technically applies to taxable income above $25 million. If your total income for the year lands below that mark, your effective state rate ends up a bit lower and you’ll get the over-withheld amount back as a refund. Still, New York’s brackets are steep across the board. Income above roughly $1.077 million is taxed at 10.30%, so even a mid-six-figure prize sits in a high bracket. For most big winners, the 10.90% withholding is close to the final state liability.
NYC and Yonkers Add a Local Layer
Two localities in New York pile on an extra income tax that reaches lottery winnings.
New York City’s local income tax tops out at 3.876%, which applies to taxable income above $50,000 for single filers and $90,000 for married couples filing jointly.4Office of the New York City Comptroller. The NYC Personal Income Tax Before and After the Pandemic A meaningful lottery win puts you in the top bracket immediately. The Lottery withholds 3.876% from prizes paid to NYC residents.3New York Lottery: Official Site. General Guidelines The tax covers all five boroughs: Manhattan, Brooklyn, Queens, the Bronx, and Staten Island.
Yonkers has a smaller version. The Lottery withholds 1.82575% from prizes paid to Yonkers residents.3New York Lottery: Official Site. General Guidelines
Live anywhere else in New York State and you pay no local tax on lottery winnings. Residence is what matters, not where you bought the ticket. Buying in Manhattan while living on Long Island does not trigger the NYC tax.
Combined Marginal Rates for 2026
The maximum combined marginal rates for a large jackpot winner:
- NYC resident: 37% federal + 10.90% state + 3.876% city = up to 51.776%
- Yonkers resident: 37% federal + 10.90% state + 1.82575% city = up to 49.726%
- Rest of New York State: 37% federal + 10.90% state = up to 47.90%
These are marginal rates on the highest-taxed portion of income, not flat rates on the whole prize. On a nine-figure jackpot, though, nearly all of it sits in the top brackets, so the effective rate ends up very close to those numbers.
If You Don’t Live in New York
Residency doesn’t let out-of-state winners off the hook for state tax. New York treats lottery prizes over $5,000 as New York-source income for any winner, regardless of where they live.5New York State Tax Department. FAQs: New York State Lottery Winners The Lottery withholds the same 10.90% whether you live in Buffalo, Boston, or Boise.3New York Lottery: Official Site. General Guidelines
Local taxes work differently. NYC and Yonkers taxes apply only to residents of those places. A New Jersey resident who buys a winning ticket in Times Square owes New York State tax but not the NYC tax.5New York State Tax Department. FAQs: New York State Lottery Winners
Non-residents file a New York non-resident return, Form IT-203, reporting the prize as New York-source income.6New York State Department of Taxation and Finance. Instructions for Form IT-203 Nonresident and Part-Year Resident Income Tax Return Your home state will also tax the winnings, since most states tax residents on all income regardless of source. To prevent double taxation, your home state will generally credit the tax paid to New York, so you end up paying the higher of the two rates rather than both stacked. Smaller prizes get a break: if a non-resident’s prize is $5,000 or less, it isn’t treated as New York-source income and no New York State tax applies.5New York State Tax Department. FAQs: New York State Lottery Winners
Lump Sum vs. Annuity Changes the Math
Mega Millions and Powerball let you choose between a single lump sum and an annuity paid in 30 installments over 29 years. The tax picture differs sharply.
A lump sum delivers the entire present cash value in one shot, and the full amount is taxable income in the year you claim it. That almost guarantees top federal and state brackets. The upside is finality: you know what you owe, you pay it, you invest the rest. The downside is the size of the bill in a single year.
An annuity spreads the income across decades, so only each annual installment is taxed in the year received. A $300 million annuity pays roughly $10 million a year, which is still enough to hit the top bracket, so the annuity does not drop a huge jackpot into a lower rate. Where it helps is with mid-range prizes, where annual installments might stay below the top bracket thresholds. The annuity also forces discipline: you can’t spend what hasn’t arrived.
Neither option wins universally. The lump sum gives you investment control and removes the risk that tax rates climb over the payout period. The annuity provides built-in pacing and, for moderately large prizes, can genuinely reduce the marginal rate applied to each year’s income. Run the numbers both ways with a tax professional before choosing.
Pay Quarterly to Avoid an Underpayment Penalty
Because 24% federal withholding falls short of the top rate, the IRS expects you to cover the gap through quarterly estimated tax payments rather than waiting until April. The due dates are April 15, June 15, September 15, and January 15 of the following year.7Internal Revenue Service. When Are Quarterly Estimated Tax Payments Due? Win mid-year and you’ll need to calculate what you owe for the remaining periods and pay on time.
Falling behind triggers an underpayment penalty. You can avoid it if total withholding and estimated payments cover at least 90% of the current year’s tax, or if you owe less than $1,000 at filing.8Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty For high-income earners (adjusted gross income above $150,000 in the prior year), a separate safe harbor requires paying at least 110% of the previous year’s total tax. A tax professional can map out each quarterly payment so you don’t end up paying a penalty on top of an already enormous bill.
Debts Can Be Pulled From Your Prize Before You See It
Before you receive your check, the New York Lottery is required by law to check for certain outstanding debts and deduct them from any prize of $600 or more. These offsets cover past-due child support, overdue New York State tax liabilities, and repayment of public assistance benefits previously received.3New York Lottery: Official Site. General Guidelines The money goes directly to the appropriate agencies, and you’ll get written notice of what was taken. One thing to know: you still owe income tax on the full gross prize, including the portion diverted to pay the debt.
Gambling Losses Can Shave the Taxable Amount
Federal tax law lets you deduct gambling losses, but only up to the amount of gambling income you report for the year, and only if you itemize on Schedule A.9Internal Revenue Service. Topic No. 419, Gambling Income and Losses Losses can’t create a net deduction against other income. Win $50,000 on a scratch-off and spend $8,000 on losing tickets through the year, and you can deduct that $8,000 against the $50,000, dropping taxable gambling income to $42,000.
New York State follows the same rule: gambling loss deductions are capped at gambling income reported on the return. To claim the deduction you need thorough records. The IRS expects a diary or log of each session with dates, locations, amounts wagered, and wins or losses, plus receipts, tickets, or statements. Losing scratch-off tickets are the most common documentation for lottery players.
For a winner with a single big prize and no documented play history, this deduction rarely moves the needle. For regular players, accumulated losses can meaningfully reduce the taxable portion of a win.