Powerball Jackpot Winnings Exempt from State Taxes in Select States During 2025
In the realm of lottery games, the Powerball jackpot has been making waves recently, with its September 3 draw offering a staggering $1.4 billion prize. But for those considering purchasing a ticket, understanding the tax implications across different states is crucial.
Currently, four states – Florida, Texas, Washington, and South Dakota – do not impose state taxes on lottery winnings, meaning only federal tax applies. In these states, lottery winnings are subject solely to federal taxation without additional state income tax on the prize.
On the other hand, California, a state known for its high prices and gas taxes, does not tax lottery winnings. However, residents in Washington state found themselves paying more for gas than Californians for a period last year, making it the most expensive in the U.S.
Texas, where gas prices are relatively lower, is another state that doesn't tax Powerball winnings. Voters in the Lone Star State recently approved major property tax relief, and the state's sales tax rate is 6.25%, with localities allowed to add an additional 2%.
Wyoming, another state without personal or corporate income taxes and no estate or inheritance taxes, also doesn't tax Powerball winnings. It's worth noting that Wyoming is one of 13 states that won't tax your retirement income as well.
Tennessee, known for its relatively low property tax compared to other states and a generally low cost of living, doesn't tax Powerball winnings because the state has no income taxes.
New Hampshire, which doesn't tax lottery winnings mainly because the state has no income tax and no sales tax, has just phased out its tax on dividends and interest income. However, it's important to note that New Hampshire has high property taxes.
Not all states are as generous, though. States that have the highest Powerball taxes could impose some state tax liability. For instance, winners of the Powerball jackpot will have to pay additional federal taxes based on their federal income tax bracket.
In contrast, Alabama, Alaska, Hawaii, Nevada, and Utah are the five states that do not participate in Powerball.
Lastly, it's essential to remember that lottery tickets are $2 per play and are sold in 45 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. So, whether you're planning to take a chance on the Powerball or not, understanding the tax implications in your state could be a crucial factor in your decision-making process.
