Taxes on New York Lottery Winnings: Money The State Takes Out First

By: Mike Sullivan
Calculator with Buttons for Taxes

Key Takeaways

  • Taxes are automatically taken out of winnings over $5,000. Same for prizes over $600 if you provide no Social Security number or tax ID number.
  • Winner’s place of residence affects amount of taxes automatically deducted.
  • Other automatic withholdings on $600 and up: If you owe Public Assistance, past due child support, or past due NY State Tax.

How Much Tax is Deducted From New York Lottery Winnings? 

Withholdings are based on federal and New York State laws. 

Current NY Lottery tax rates:

  • Federal 24%
  • Federal backup 24%
  • Federal Non-resident Alien 30%
  • New York State 10.90%
  • New York City 3.876%
  • Yonkers 1.82575%

That whittles your winnings down, right?

Could be worse if you claimed a giant scratch off prize personally but you and other people pooled your money for tickets. Consult a solid CPA or you might get smacked with the entire tax bill!

A CPA might suggest forming a partnership, trust, or New York S corporation before grabbing that giant check. This way you’ll have a clear-cut portion you are supposed to pay in taxes.

See, Mr. Tax Man always wins. Because income is taxed and the IRS deems lottery winnings as… ding, ding, ding, income! 

Did you Know?

8 states don’t charge tax on lottery winnings: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.

Understanding Tax Implications for NY Lottery Winners

Yes, taxes are part of life but everyone gets a shot at the NY Lottery including non-NY residents and non-US citizens. Everybody pays too. Non citizens, out-of-staters, and senior citizens. Winnings above $600 get reported to Uncle Sam.

How about home-state double tax? Out-of-staters who win New York lotto prizes should check with their home-state tax agency on liability. But often states credit winners for taxes paid on winnings in other states.

More money, more problems. Larger NY lottery winnings could result in owing more than the taxes automatically taken out. Oh, and selling future payments from a NY lottery prize to a third party means your lump sum payment gets taxed.

Death and New York Lottery taxes: If you owe taxes, your estate or beneficiary owes those taxes should you croak before getting your hands on all the winnings. RIP.

Deductions before receiving lotto winnings can be a blessing so you don’t join Americans who collectively owe $100+ billion in back taxes!

Financial Advice for NY Lottery Winners

IRS rules on lotto winnings: Losses on gambling are legitimate tax deductions only up to the amount of winnings. (i.e. $500 lottery winnings in 2023 means you can deduct $500 if you spent that much on tickets) 

Hang on to losing tickets though. When itemizing income taxes and deducting lottery losses, you’ll need to prove losses. Uncle Sam isn’t into the honor system. So file away losing scratch offs and get specifics from a legit tax professional.

Also, watch for automatic deductions you think are incorrect. Catch an error then take action:

  • Child support— Report errors to your local Child Support Representative. 
  • Public assistance— Call 866-447-4844 or write to New York State Office of Temporary and Disability Assistance, Public Assistance Unit, PO Box 22078, Albany, NY 11201-2078. Can take up to 6 weeks.

Money saved is money earned. Contesting potential errors is worth your time despite snail-like responses government bodies are famous for. 

Did you Know?

Super scratchers: $10 million is the largest current prize for New York Lottery scratch offs. 

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