Yes, Massachusetts does tax lottery winnings. Every prize is hit with a flat 5% state income tax, and if your total taxable income for the year crosses $1,107,750 in 2026, the portion above that line carries an extra 4% surtax. Federal income tax applies on top of the state tax, with the IRS requiring 24% withholding on any prize over $5,000.1
The Flat 5% State Rate
Massachusetts classifies lottery winnings as Part B taxable income and taxes them at the state’s flat 5% rate. It doesn’t matter whether the prize came from a scratch ticket, Powerball, Mega Millions, or a local raffle. The rate doesn’t scale with the size of the prize or your other income.
If you live in Massachusetts, you owe the 5% on winnings from anywhere, not just tickets sold in-state. Buy a winning ticket while visiting another state, and Massachusetts still wants its cut. The Department of Revenue treats gambling income consistently for tax purposes regardless of source.
The 4% Surtax on Large Prizes
Since 2023, Massachusetts has added a 4% surtax on taxable income above an annually adjusted threshold. For the 2026 tax year, the threshold is $1,107,750. Only the portion of your taxable income above that number is subject to the extra 4%, which brings the effective state rate on that slice to 9%.
A big jackpot can push you past the threshold in the year you collect it even if your regular income is modest. Say you earn $80,000 at your job and win a $2 million prize. You owe 5% on all of your taxable income and another 4% on everything above $1,107,750. The threshold adjusts for inflation, so it shifts slightly each year.
Federal Tax on Top
Lottery winnings are federally taxable too. The IRS requires the lottery commission to withhold 24% of any prize over $5,000 before it hands you a check. That withholding is a prepayment, not your final bill.
Your actual federal rate depends on your total taxable income for the year. The 2026 federal brackets run from 10% to 37%, with the top rate hitting taxable income above $640,600 for single filers and $768,700 for joint filers. A large prize can drop you squarely in the 37% bracket, meaning you may owe substantially more than the 24% already withheld. You pay the difference when you file.
What Gets Withheld Before You See the Money
The Massachusetts State Lottery Commission withholds 5% state tax from any prize of $600 or more. The federal threshold is higher: the IRS only requires 24% withholding on prizes over $5,000. So a prize between $600 and $5,000 will have state tax taken out at the counter but no federal tax withheld.
For non-lottery gambling winnings such as casino or sports betting payouts, federal withholding of 24% applies when the winnings exceed $5,000 and are at least 300 times the wager. Massachusetts still withholds 5% on those winnings at the $600 mark.
Winning under $600 doesn’t get you off the hook. You still owe 5% state tax on the full amount. The lottery just won’t take it out for you, so you’ll report and pay it yourself when you file.
Estimated Tax Payments
If your winnings create a tax bill that withholding won’t cover, you may need to make estimated quarterly payments. Massachusetts requires estimated payments when the tax you expect to owe on income not subject to withholding exceeds $400. Skipping them can trigger an underpayment penalty.
This comes up most often when a prize is big enough to trigger the 4% surtax, since the lottery only withholds at the flat 5% rate. The gap between what was withheld and what you actually owe can be large. If a big prize lands mid-year, consider making an estimated payment for that quarter instead of waiting until April.
Can You Deduct Lottery Losses?
On your Massachusetts return, no. You have to report the full amount of your winnings, and you cannot reduce them by the cost of losing tickets. The only ticket cost you can subtract is the price of the specific winning ticket itself.
Massachusetts allows a narrow deduction for gambling losses at a licensed casino operating under Chapter 23K or at a licensed racing or simulcasting facility, but that deduction only offsets gains from those same types of establishments. It cannot be used against lottery income.
Federal rules are more forgiving. You can deduct gambling losses, including losing lottery tickets, on Schedule A if you itemize. The deduction cannot exceed the gambling income you reported, and you need detailed records: receipts, tickets, and statements.
Reporting Winnings on Your Return
The lottery commission sends a Form W-2G for any prize that meets reporting requirements. Starting in 2026, the federal reporting threshold for certain gambling winnings is $2,000. Box 1 shows total winnings; Box 15 shows Massachusetts tax withheld. Hang onto it. The Department of Revenue cross-checks reported amounts against Lottery Commission records.
On Massachusetts Form 1, state lottery winnings go on Line 8b. Enter net winnings, meaning the prize minus the cost of the winning ticket, and never enter a number below zero. Winnings from lotteries outside Massachusetts and other gambling income go on Schedule X, Line 3, not on Line 8b. The state tax already withheld shows up as a credit in the payments section, reducing what you owe. You can track your return or refund through MassTaxConnect.
If You Don’t Live in Massachusetts
Winning a Massachusetts lottery prize as a non-resident still triggers Massachusetts tax. Those winnings count as Massachusetts source income, and the Lottery Commission withholds 5% from prizes of $600 or more regardless of where you live.
Non-residents whose Massachusetts source income exceeds $8,000, or the personal exemption amount after apportionment, whichever is less, must file a Massachusetts return on Form 1-NR/PY. Lottery winnings go on Line 10b. If your home state also taxes gambling income, you may be able to claim a credit there for the tax paid to Massachusetts. Check your home state’s rules.
Lump Sum Versus Annuity
For large jackpots, you usually choose between a single lump-sum payment and annual installments spread over many years. Massachusetts taxes lottery income in the year you receive it or have the right to receive it. Take the lump sum, and the whole prize is taxable in one year, which almost guarantees you hit the 4% surtax and likely lands you in the top federal bracket. Annuity payments spread the income across years, potentially keeping more of each payment below the surtax threshold and in lower federal brackets.
The lump-sum option is always less than the advertised jackpot because it reflects the present value of the annuity stream. Whether the lump sum or the annuity leaves you with more after tax depends on your other income, expected investment returns, and future tax rates. Talk it through with a financial advisor before making the choice, because it can’t be undone.