No, you do not get a tax refund on lottery winnings
Lottery winnings are not taxable income that you overpay during the year, so there is no refund to claim. Instead, the lottery operator withholds taxes at the time you win and sends that money directly to federal and state tax authorities. You may owe additional taxes when you file your return, but you will not receive money back.
The withholding happens automatically. When you claim a prize, the lottery removes a percentage before you ever see the full amount. Federal withholding is 24 percent on most lottery prizes. State withholding varies by state — some states take 5 to 8 percent, others take more, and a few take nothing. That money goes straight to the IRS and your state revenue department, not to you.
The confusion usually comes from mixing up withholding with actual tax liability. Withholding is money taken out in advance. Your actual tax bill depends on your total income for the year, your filing status, and deductions. If the lottery withheld more than you owe, you get a refund. If you owe more than was withheld, you pay the difference when you file.
Key Takeaways
- The lottery withholds 24 percent federal tax and varying state tax automatically when you win, so you never receive the full prize amount.
- Withholding is not the same as your total tax bill — you may owe more tax when you file your return, or you may receive a refund if too much was withheld.
- Your actual tax liability on lottery winnings depends on your total income for the year, not just the prize amount.
- You must report lottery winnings on your federal tax return even if the lottery already withheld taxes.
- Some states do not tax lottery winnings at all, while others tax them at rates higher than the federal 24 percent withholding.
How lottery withholding works
When you win a lottery prize, the state lottery commission or the retailer handling the prize removes taxes before paying you. For federal tax, the standard withholding rate is 24 percent. This is not your final tax bill — it is an advance payment to the IRS based on a flat rate that applies to most lottery winners.
State withholding happens at the same time and varies widely. New York takes about 8.82 percent. California takes nothing because it does not tax lottery winnings. Illinois takes 24 percent on top of federal withholding. Some states take 5 percent, others 10 percent. The lottery operator is required to know the rules for your state and withhold accordingly.
You receive a Form W-2G from the lottery operator showing the prize amount, the federal withholding, and the state withholding. This form goes to you, the IRS, and your state tax authority. You use it when you file your tax return to show what was already paid.
When you owe more tax than was withheld
The 24 percent federal withholding is often not enough to cover your actual tax liability. Lottery winnings are taxed as ordinary income, and depending on your total income for the year, your tax bracket may be higher than 24 percent. If you are already earning a high income from employment or other sources, the lottery prize pushes you into a higher bracket, and you will owe additional tax.
For example, if you win $100,000 and the lottery withholds $24,000 in federal tax, but your actual federal tax liability on that prize is $37,000 (because of your tax bracket), you will owe $13,000 when you file. You do not get a refund — you pay the difference.
This is why many lottery winners end up writing a check to the IRS at tax time. The withholding covers a baseline, but it does not account for your specific situation. You should plan to set aside additional money if you win a large prize, especially if you already have substantial income.
When you get a refund on lottery winnings
You receive a refund if the total withholding (federal plus state) exceeds your actual tax liability on the prize plus any other income you earned that year. This happens less often than owing more tax, but it does occur.
For instance, if you win $50,000, the lottery withholds $12,000 in federal tax and $3,000 in state tax, but your actual combined tax liability on that prize is $13,500, you have overpaid by $1,500. You will receive that $1,500 back when you file your return and the IRS processes it.
The refund comes through the normal tax return process — it is not a special lottery refund. You file your return, report the prize on the appropriate line, and the IRS calculates whether you overpaid. If you did, you receive the refund by check or direct deposit, typically within a few weeks to a few months depending on how the IRS is processing returns that year.
Reporting lottery winnings on your tax return
You must report all lottery winnings on your federal tax return, even if the lottery already withheld taxes. The Form W-2G you receive from the lottery operator shows the prize amount. You report this on Schedule 1 (Other Income) and then on your Form 1040.
The IRS receives a copy of the W-2G directly from the lottery operator, so they already know about your prize. If you do not report it on your return, the IRS will notice the discrepancy and contact you. Reporting it yourself prevents penalties and interest.
State tax reporting depends on your state. If your state taxes lottery winnings, you report the prize on your state return the same way you do on your federal return. If your state does not tax lottery winnings (like California, Florida, or Tennessee), you do not report it on your state return, but you still report it federally.
States that do not tax lottery winnings
Nine states do not tax lottery winnings at all: California, Florida, Idaho, Illinois, Michigan, Mississippi, New Hampshire, North Dakota, and South Dakota. If you win in one of these states, you still owe federal tax (24 percent is withheld), but you do not owe state tax.
This does not mean you get a refund — it means the state does not take a cut. The federal withholding still applies. However, because there is no state withholding, you keep more of your prize upfront. When you file your federal return, the same rules apply: if 24 percent was more than you owe, you get a refund; if it was less, you pay the difference.
If you win in a state that does tax lottery winnings, the state withholding is in addition to federal withholding. Some states withhold at rates higher than their normal income tax rate specifically for lottery prizes, so the total amount taken out can be substantial.
What to do if you think you are owed a refund
If you won a lottery prize and believe the withholding was more than your actual tax liability, file your tax return as you normally would. Report the prize using the Form W-2G, calculate your total income and tax liability, and let the IRS do the math. If you overpaid, the refund will be calculated automatically.
Do not contact the lottery operator asking for a refund — they do not issue refunds on withholding. The lottery's job is to withhold and send the money to tax authorities. Your refund, if you are owed one, comes from the IRS or your state tax authority after you file your return.
If you filed your return and did not receive an expected refund, check the status of your return using the IRS Where's My Refund tool on IRS.gov. You can also contact the IRS at 1-800-829-1040. For state refunds, contact your state revenue department — the contact information is on your state's tax website.
Frequently Asked Questions
Can I claim the lottery withholding as a tax credit?
No. The withholding is credited automatically against your tax liability when you file your return. You do not claim it separately. The IRS receives the W-2G and applies the withholding to your account. If you overpaid, you receive a refund; if you underpaid, you owe the difference.
What if I won the lottery in one state but live in another?
You owe tax to both states in most cases. The state where you bought the ticket withholds at the time of the prize. Your home state may also tax the winnings. You report the prize on both your federal return and both state returns. Some states have reciprocal agreements that prevent double taxation, but you should check your specific states' rules.
Do I have to pay taxes on a lottery prize I gave away?
If you won the prize, you owe tax on it regardless of whether you keep it or give it away. The tax is based on the prize amount, not on what you do with the money afterward. Giving money away does not reduce your tax liability on lottery winnings.
Will I get a refund if I won a small lottery prize?
Possibly, but it depends on your total income and tax situation. Even small prizes are subject to the 24 percent federal withholding. If your actual tax liability is lower than the withholding, you will receive a refund when you file. If your liability is higher, you will owe more.
How long does it take to get a lottery tax refund?
Lottery tax refunds follow the normal tax refund timeline. If you file electronically and choose direct deposit, the IRS typically issues refunds within 21 days. Paper returns take longer — usually six to eight weeks. State refunds vary by state but generally take four to eight weeks.