State taxes can range from nothing to a high of 8.82%.Īfter subtracting the 25% federal tax withholding and any additional state taxes, the net winnings are significantly reduced. Your state may also have additional taxes or filing requirements for lottery winnings, so it’s important for lottery winners to consult with a tax expert or financial advisor to understand the potential taxes and filing requirements.Īdditionally, the average person’s marginal state tax rate, combined with the 37% federal rate, would mean that winning $10,000 in the lottery might only result in a net gain of about $6,000.
Depending on the size of your winnings, the amount you owe in taxes could be as high as 37%. In the United States, lottery winnings are subject to federal income tax, in addition to any applicable state taxes. Alabama does have a lottery tax credit that can be used to offset state taxes for nonresidents, but you must pay your taxes due first in order to be eligible for the credit. The state and federal taxes are due in the same year you receive your winnings. In addition, any nonresident winning a single-state lottery from Alabama must also pay the applicable taxes. Generally, both single-state and multi-state lottery winnings are taxed. According to the Alabama Department of Revenue, lottery winnings in the state of Alabama are subject to both state and federal income tax.
