Federal and state tax on lottery winnings — tax year 2026
Vermont taxes lottery winnings at 8.75%. Federal income tax applies on every prize regardless of state, reaching 37% at the top bracket. Only 24% is withheld when you claim, so a jackpot leaves a large balance owed at filing.
Lump sum, single filer, Vermont resident. Cash value is estimated at 50% of the advertised annuity — the real ratio moves with interest rates, so treat these as close approximations, not quotes.
| Advertised | Cash value | Federal tax | Vermont tax | Take-home |
|---|---|---|---|---|
| $1,000,000 | $500,000 | $143,769 | $43,750 | $312,481 |
| $10,000,000 | $5,000,000 | $1,805,957 | $437,500 | $2,756,543 |
| $100,000,000 | $50,000,000 | $18,455,957 | $4,375,000 | $27,169,043 |
| $500,000,000 | $250,000,000 | $92,455,957 | $21,875,000 | $135,669,043 |
The advertised jackpot is the total of 30 graduated annuity payments, not a pot of cash sitting somewhere. The lump sum is the present value of that stream — typically around half the headline number before a cent of tax.
Taking the annuity spreads income across 30 years, which can keep more of it below the top federal bracket and is a genuine argument in its favour. Against that, it locks you into three decades of tax law nobody can predict, and the payments are fixed regardless of what you could have earned investing a lump sum.
There is no universally correct answer. It turns on the size of the prize, your other income, and your own circumstances — which is exactly the point at which this page stops being a substitute for a tax professional.
Single filer.
| Taxable income | Rate |
|---|---|
| $0 – $12,400 | 10% |
| $12,400 – $50,400 | 12% |
| $50,400 – $105,700 | 22% |
| $105,700 – $201,775 | 24% |
| $201,775 – $256,225 | 32% |
| $256,225 – $640,600 | 35% |
| $640,600 and above | 37% |
Brackets are progressive: reaching the 37% bracket does not mean the whole prize is taxed at 37%, only the portion above the threshold.
24% is withheld federally at claim time. A jackpot sits in the 37% bracket, so the difference — 13% of the prize — is still owed when you file. On a $100 million cash value that gap is over $13 million. It is the single most common surprise for winners, and it is why estimated payments matter in the year you claim.
Federal brackets and state rates are for tax year 2026, last verified 2026-08-09, from the Tax Foundation federal brackets and state income tax rates. State figures are top marginal rates, which is the right assumption for a jackpot — any jackpot lands in the top bracket — but overstates the bill on small prizes where lower brackets still apply.
This is an estimate for general information, not tax advice. Local taxes, filing status, deductions, and your other income all change the result. Talk to a tax professional before making decisions about a real prize.
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