A non-US resident who wins a US lottery is taxed differently from a US citizen: 30% federal withholding instead of 24%, almost no treaty relief, and a different return. On today's $674,000,000 jackpot that is roughly $85.2M withheld federally before any state tax.
30% instead of 24%
US citizens and residents face a 24% withholding rate against a 37% liability. Nonresident aliens face a flat 30% withholding on US-source fixed or determinable income, which includes lottery and gambling winnings. It is withheld at source and is generally the final US tax, because nonresident aliens cannot deduct gambling losses and cannot use the lower brackets.
| US citizen / resident | Nonresident alien | |
|---|---|---|
| Withholding at payout | 24% | 30% |
| Final US rate | Up to 37% | 30% (flat) |
| Gambling losses deductible | Yes, if itemising, capped at winnings | No |
| Return required | Form 1040 | Form 1040-NR |
| Treaty relief | n/a | Rare for lottery winnings |
Why treaties rarely help
Tax treaties reduce withholding on things like interest, dividends, royalties and pensions. Gambling winnings are usually not covered, and the US model treaty has no article that would reduce the 30% rate on a lottery prize. Even where a treaty has an "other income" article, the saving clause typically preserves the US right to tax.
There are exceptions in a small number of older treaties, and the analysis is technical. It is a question for a cross-border adviser with the specific treaty text, not for a calculator.
State tax still applies
If the ticket was bought in a state with an income tax, that state may also withhold. Rates for nonresidents are sometimes different from resident rates — Maryland's 8.75% nonresident withholding is the clearest example. Some states require a nonresident return to settle the difference.
California and Pennsylvania exempt their own lottery prizes, and the exemption attaches to the prize rather than the person, so those states take nothing from a California or Pennsylvania ticket regardless of who claims it.
Your home country may also tax it
Most countries tax lottery winnings in some form, and the US will not credit a foreign tax against this prize. Whether your home country taxes it, and whether it gives relief for the 30% already withheld, depends on its domestic law and its treaty with the US. In Canada, lottery winnings are generally not taxable; in many others they are taxed as other income at flat or progressive rates.
Practical points
- You will need US identification. A passport and, in many cases, an ITIN to claim and to file.
- Withholding happens before you are paid, and some lotteries require the claim in person.
- Keep the W-2G or 1042-S you receive — you will need it for the 1040-NR and for your home-country return.
- Consider the 30% before choosing lump sum or annuity. The flat rate applies to each annuity payment as it is paid, and a treaty or law change over 29 years could move it either way.
Questions
What rate applies to a nonresident alien winning a US lottery?
30% federal withholding on the gross prize, under the rules for fixed or determinable annual or periodical income. Unlike the 24% domestic withholding, this is generally close to final — our treaty network does not usually reduce lottery winnings.
Can a tax treaty reduce the 30%?
Rarely. Most US treaties either exclude gambling winnings or lack an article that covers them, and the saving clause lets the US tax its residents and citizens regardless. A few treaties have specific gambling articles; check yours with a cross-border adviser rather than assuming.
Do I have to file a US tax return?
Usually yes — Form 1040-NR — even though tax was withheld. Filing is how you claim any refund, report the state withholding, and avoid a compliance problem if you later apply for a US visa or travel. Nonresident aliens cannot deduct gambling losses against winnings.
Is the state tax different for nonresidents?
States tax prizes sourced to them, and several withhold at a nonresident rate. Maryland, for example, withholds nonresidents at 8.75%. California exempts California Lottery prizes for everyone, resident or not.