For tax purposes, lottery winnings count as regular individual income, just like wages, with the rate is based on the taxpayer's total earnings. A lottery jackpot will probably be taxed at the highest federal individual tax rate, which in 2014 was 39.6 percent, according to the Tax Foundation.
Some states and local governments also tax lottery winnings. While the federal tax is unavoidable, in some cases the state and local taxes may be minimized by living in a state with no income tax, like Florida. On the other hand, Forbes Magazine says a lottery winner living in New York City in 2013 would have been slammed with taxes equal to over 48 percent of his winnings.