If You Win $750,000, How Much Will Be Taxed?
Understand how taxes impact a $750,000 windfall, including federal, state, and withholding considerations that affect your final amount.
Winning $750,000 can be life-changing, but taxes will take a significant portion. The government considers most winnings taxable income, meaning you won’t keep the full amount. Understanding your tax obligations is crucial for financial planning.
Federal Income Tax Liabilities
The IRS treats lottery winnings as ordinary income, subject to progressive tax rates. In 2024, for single filers, income above $609,350 falls into the 37% bracket, while for married couples filing jointly, the threshold is $731,200. Since a $750,000 prize exceeds these amounts, a portion will be taxed at the highest rate.
For a single filer with no other income, the tax breakdown is:
– 10% on the first $11,600
– 12% up to $47,150
– 22% up to $100,525
– 24% up to $191,950
– 32% up to $243,725
– 35% up to $609,350
– 37% on the remaining amount
This results in an estimated federal tax liability of about $235,000 before deductions or credits. If the winner has additional earnings, more of the winnings may be taxed at the highest rate.
Withholding Amounts
Lottery winnings over $5,000 are subject to automatic federal withholding at 24%. For a $750,000 prize, this means $180,000 is withheld immediately. However, since the actual tax liability is higher, the winner will likely owe more when filing their return.
For a single filer with no other income, the total tax bill would be around $235,000, leaving a shortfall of $55,000 beyond the withheld amount. Additional income could increase this gap.
The IRS requires taxpayers to pay taxes throughout the year. If withholdings are insufficient, estimated quarterly payments may be necessary to avoid penalties and interest.
State and Local Liabilities
State taxes on lottery winnings vary. Some states, including California, Florida, Texas, and Tennessee, do not tax lottery prizes. Others, like New York, impose high rates—New York’s top state tax rate is 10.9%, amounting to roughly $82,000 on a $750,000 prize.
Many states also require mandatory withholding. New York withholds 10.9% on large winnings, while Maryland deducts 8.95% for residents and an even higher rate for nonresidents. These withholdings reduce the immediate payout but may not cover the total state tax liability.
Local taxes can further reduce the final amount. New York City imposes an income tax of up to 3.876%, adding about $29,000 in additional taxes. Some municipalities in Ohio and Pennsylvania also levy local income taxes on lottery winnings.
Potential Gift Tax Factors
Giving away a portion of lottery winnings can have tax consequences. In 2024, individuals can gift up to $18,000 per recipient without reporting requirements. Amounts above this must be reported on Form 709, which tracks lifetime gifts against the estate and gift tax exemption, set at $13.61 million in 2024.
If total lifetime gifts exceed this exemption, a tax of up to 40% may apply. Winners planning to share their prize should consider spreading gifts over multiple years or utilizing spousal exemptions, which allow married couples to gift up to $36,000 per recipient annually without affecting their lifetime cap.