Withholding is 38.776% for NYC
Withholding on a $1 million prize for a New York City resident is 38.776 percent, leaving $612,240 at the claim center.
The short answer
A further federal bill follows
A $1 million income is taxed well above 24 percent, so expect a further federal bill at filing, often six figures.
Draw date sets residency
Where you lived on the date of the draw sets the state and city layer.
A $1 million prize, line by line
Where the money goes
New York City resident, withholding at statutory rates.
$240,000 · Federal at 24 percent
A flat statutory rate, not your bracket.
$109,000 · New York State at 10.9 percent
Withheld by the Gaming Commission.
$38,760 · New York City at 3.876 percent
A Yonkers resident pays about $18,258 instead.
$612,240 · Received at the claim center
Before the further federal bill at filing.
Withholding figures shown at statutory rates. The final federal liability is higher.
Same math applies
Any large one-off ordinary-income payment
The example below is a lottery prize, because that is the most common version of this question. The same arithmetic applies to any large one off payment taxed as ordinary income, including a bonus, a severance package, or an equity payout. The wider picture is on our page on New York lottery tax.
01Withholding
Withholding on a $1 million prize, line by line
| Amount | |
|---|---|
| Prize | $1,000,000 |
| Less: federal withholding at 24 percent | ($240,000) |
| Less: New York State at 10.9 percent | ($109,000) |
| Less: New York City at 3.876 percent | ($38,760) |
| Received at the claim center | $612,240 |
A Yonkers resident pays a surcharge of 16.75 percent of the state amount, about $18,258, instead of the city figure. A resident elsewhere in the state pays neither.
The Yonkers surcharge is a percentage of your New York State tax rather than a rate on the prize, which is why published Yonkers figures differ from each other.
02Further federal bill
Why a further federal bill follows at filing
A $1 million income is not taxed at 24 percent. Most of it is taxed higher, and the top federal rate is 37 percent.
The lottery withheld 24 percent because the statute requires it, not because 24 percent is your rate. The difference is deferred to your return.
Federal withholding against federal tax owed
On $1 million, for a winner already in the top bracket.
Withheld
24 percent, flat
$240,000
Owed
37 percent, top bracket
$370,000
$130,000 of the difference is yours to find.
| Amount | |
|---|---|
| Federal tax for a winner already in the top bracket | $370,000 |
| Less: federal withholding already taken | ($240,000) |
| Federal shortfall due at filing | $130,000 |
A winner with no other income owes less, because the first $640,600 of taxable income is taxed at lower rates. A winner with a salary on top owes the full amount.
You may also need to make an estimated payment during the year, or you owe an underpayment penalty on top of the tax.
03Deductions
What can and cannot be deducted against a prize
Very little can be deducted against a lottery prize. It is one of the few large incomes with almost nothing to set against it.
- The standard deduction does not offset it in any meaningful way.
- Ordinary business or rental losses do not shelter it.
- Charitable donations are deductible if you itemize, within the annual limits for cash gifts.
- Capital losses from elsewhere offset capital gains, not ordinary income, beyond the $3,000 annual limit.
The planning that works happens before you claim.
04Lump sum vs annuity
Lump sum against annuity
Lump sum
All of it falls into one tax year, at the highest rates you will ever pay. Almost the whole prize is taxed in the top federal bracket.
Annuity
Spread across thirty years, so more of each payment falls in lower brackets. Each payment is withheld and taxed in its own year.
On tax alone the annuity usually costs less. Investment returns, inflation and your own circumstances can reverse that, which is why the decision is worth an hour with an accountant first.
The choice is generally irreversible and it has to be made before you claim. It is worth an hour with an accountant before you do.
05Bonuses, severance, equity
Bonuses, severance and equity payouts
The same arithmetic applies to a large bonus, a severance payment, or an equity event, with one difference. You also pay payroll tax on employment income, and withholding on a supplemental wage payment, meaning a bonus or other one off pay, follows different rules from lottery withholding.
The problem is the same. A flat withholding rate against a progressive tax system leaves a gap in April.
24%
Lottery statutory withholding
37%
Top federal bracket
Gap
The difference lands in April
06FAQ
Frequently asked questions
How much is $1 million after taxes in New York?
About $612,240 leaves the claim center for a New York City resident, and a further federal bill follows at filing. There is no single after tax number, because the second half depends on the rest of your income for the year.
Why is only 24 percent withheld when the rate is 37 percent?
Federal law sets gambling withholding at a flat 24 percent. It was never designed to cover a prize taxed mostly at the top bracket.
Is the annuity better than the lump sum?
On tax alone the annuity usually costs less, because it spreads the income across thirty years instead of stacking it into one. Investment returns, inflation and your own discipline can reverse that. The choice is made once, before you claim.
Is there a millionaires tax in New York?
Not as a separate tax. New York's top rate of 10.9 percent applies to income above $25 million, and the bracket structure below it rises with income. A $1 million prize is taxed under the ordinary brackets, not under a special millionaires rate.
Does a bonus or severance payment work the same way?
Largely, yes. A flat withholding rate against a progressive system, and a gap at filing. You also pay payroll tax on employment income, and supplemental withholding follows different rules.
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Reviewed by George Dimov, CPA, New York, NY. Serving clients in all 50 states, 15+ years advising New York taxpayers. President of George Dimov, CPA, a New York City firm serving clients across the five boroughs and nationwide.