Arizona lottery taxes: a flat 2.5%
Rate checked on November 4, 2026 against the sources listed at the end of this page.
Arizona has a flat income tax: 2.5% of taxable income, under Arizona Revised Statutes section 43-1011. There is no special lottery rate. A jackpot is simply added to your Arizona taxable income.
What changed recently is withholding. Before 2025, the Arizona Lottery withheld state tax as a share of the federal withholding (20% of it). Senate Bill 1274, the 2025 Tax Corrections Act, replaced that with the state's top individual rate: 2.5% of each payment.
Take-home pay on a lump-sum prize in Arizona
The table applies the top federal rate of 37% plus 2.5% Arizona tax. Amounts are the cash (lump-sum) value you receive, not the advertised annuity jackpot.
| Cash prize | Federal (37%) | State | You keep |
|---|---|---|---|
| $1.00M | −$370,000 | −$25,000 | $605,000 |
| $10.00M | −$3.70M | −$250,000 | $6.05M |
| $100.00M | −$37.00M | −$2.50M | $60.50M |
| $500.00M | −$185.00M | −$12.50M | $302.50M |
| $1.00B | −$370.00M | −$25.00M | $605.00M |
Federal figure is the total owed at the top bracket. At claim time only 24% is withheld; the rest is due when you file. Smaller prizes can fall into lower brackets, so the real federal bill may be less.
What is withheld when you claim
The Arizona Lottery withholds 2.5% state tax from lottery and gambling payments that are subject to federal withholding, which for lottery prizes generally means prizes over $5,000. Because Arizona's rate is flat, the 2.5% withheld is normally close to the full state tax on a large prize. Federal withholding is 24%; a jackpot winner owes up to 37% federal and should set aside the difference.
Nonresidents and cross-border tickets
Arizona law taxes nonresidents on taxable income derived from Arizona sources. We could not confirm on an official page exactly how that applies to an Arizona Lottery prize won by a resident of another state, so check with the Arizona Lottery or the Arizona Department of Revenue before you claim.
The question matters for neighbors. Nevada and Utah have no state lottery, and California does not exempt other states' lottery prizes: a Californian who wins with an Arizona ticket still owes California tax. Read ticket state vs home state and our California and Nevada guides.
Local taxes
Arizona cities and counties do not levy an income tax, so the state's 2.5% is the only state-level tax on the prize.
Small-prize subtraction: check before you file
Older Arizona returns included a subtraction for part of Arizona Lottery winnings. We have not confirmed that it still exists for 2026, so check the current Form 140 instructions or ask the Department of Revenue. It would not change much for a jackpot.
Common questions
What is Arizona's tax rate on lottery winnings in 2026?
2.5%, Arizona's flat individual income tax rate under A.R.S. 43-1011.
How much does the Arizona Lottery withhold for state tax?
2.5% of each payment subject to federal withholding, since SB 1274 (2025). It used to be 20% of the federal withholding amount.
How much of a $10 million cash prize would I keep in Arizona?
About $6.05 million after 37% federal and 2.5% state tax.
Sources
- IRS Topic 419: Gambling income and losses
- IRS Instructions for Forms W-2G and 5754
- Arizona Legislature: A.R.S. 43-1011, tax rates (2.5% of taxable income; nonresidents taxed on Arizona-source income)
- Arizona Legislature: SB 1274 (2025) fact sheet, lottery withholding at 2.5%
Calculate for Arizona: Powerball · Mega Millions · any prize amount