New Jersey uses a tiered lottery tax — 5% withheld between $10,001 and $500,000, 8% above $500,000, and a 10.75% top rate at filing. Here's exactly how it works for residents, non-residents, and how NJ compares to New York and Pennsylvania.
New Jersey is one of the few states that uses a tiered withholding schedule on lottery prizes instead of a single flat rate. The NJ Division of Taxation applies:
Withholding is not your final tax bill — it's an estimate. Your actual NJ tax depends on your total income for the year and is reconciled on your NJ-1040 return.
Withholding caps at 8%, but the NJ Gross Income Tax keeps climbing. The top bracket of 10.75% kicks in on income over $1 million. A multimillion-dollar lottery prize lands almost entirely in that top bracket, which means at filing time you typically owe an additional 2.75% (10.75% − 8% withheld) to the state on the portion above $1M.
On top of NJ's tiered withholding, the IRS withholds 24% federal on any single lottery prize over $5,000. Lottery winnings are taxed as ordinary federal income, so a large jackpot pushes you into the top 37% federal bracket — meaning roughly 13% more in federal tax owed at filing beyond the 24% already withheld.
If you bought a winning ticket in New Jersey but live elsewhere, NJ still withholds at the 5% / 8% tiers — withholding follows where the ticket was sold, not where the winner lives. You file a NJ-1040NR (non-resident return) to reconcile.
Your home state will usually also tax the winnings on your resident return, but it generally grants a credit for tax paid to New Jersey. The end result: you pay the higher of the two states' rates overall, not the sum.
| State | Withholding rate | Top filing rate | Local tax? |
|---|---|---|---|
| New Jersey | 5% / 8% tiered | 10.75% (income > $1M) | None |
| New York | 10.9% flat | 10.9% | NYC: +3.876%; Yonkers: +1.477% |
| Pennsylvania | 3.07% flat | 3.07% | None on lottery |
Bottom line: PA is the cheapest of the three by a wide margin. NJ is meaningfully cheaper than NY at the withholding stage (5–8% vs 10.9%) but closes the gap at filing time once the 10.75% top bracket applies. NYC residents pay the most by far because of the additional city tax.
New Jersey taxes both options as ordinary income in the year you actually receive the cash:
For most NJ winners, annuity wins the tax math but lump sum wins the flexibility. Read our full lump-sum vs annuity guide for the calculations.
Plug in your prize amount and state to break down federal, NJ, and (if applicable) local withholding line by line.
Open the lottery tax calculatorNew Jersey uses a tiered withholding system. Prizes from $10,001 to $500,000 are withheld at 5%. Prizes over $500,000 are withheld at 8%. At filing, NJ lottery winnings are taxed as ordinary income, and the top New Jersey gross income tax rate reaches 10.75% on income above $1 million.
No. New Jersey does not withhold state income tax on lottery prizes of $10,000 or less. The winnings are still taxable income on your NJ-1040, but no state withholding is taken at the time of payout. Federal withholding (24%) only applies above $5,000.
New Jersey withholds at the same 5% / 8% schedule for non-resident winners on prizes above $10,000. Non-residents file a NJ-1040NR and typically receive a credit on their home-state return for tax paid to New Jersey, preventing full double taxation.
NY is higher at the top: New York withholds 10.9%, plus 3.876% NYC local tax for city residents (≈14.78% combined). Pennsylvania is lower — a flat 3.07% state income tax on lottery winnings, with no tiered system. NJ sits in the middle, but its 10.75% top bracket can exceed PA and approach NY at very high prize levels.
Yes. The IRS withholds 24% on any single prize over $5,000, and lottery winnings are taxed as ordinary income at federal rates up to 37%. The 5% / 8% NJ withholding is in addition to federal withholding.
No, NJ taxes both the same way: as ordinary income in the year you receive the cash. A lump sum is taxed once at a higher bracket; an annuity spreads the income (and tax) over 20–30 years, which can keep more of each annual payment below the top 10.75% bracket.
Yes, but only against same-category NJ lottery winnings on your NJ-1040, and only with documentation (tickets, statements). NJ does not allow gambling losses from casinos or sportsbooks to offset NJ lottery winnings.
This guide is general information, not tax advice. NJ withholding tiers and brackets can change — confirm with the NJ Division of Taxation or a licensed tax professional before filing.