Lottery winnings tax in Alabama
Alabama taxes lottery winnings as ordinary income at graduated rates from 2% to 5%.
Updated · 2026 tax rules · How we calculate
You keep
$37,150
Cash at payout
$38,000
Total tax
$12,850
Due when you file
$850
- Form W-2G
- Yes
- Federal withholding at payout
- $12,000
- Federal tax on the winnings
- $10,350
- State tax
- $2,500
- Still to pay when you file
- $850
- You keep
- $37,150
$50,000 is at or above the $2,000 reporting threshold, so the payer files a W-2G with the IRS and gives you a copy.
The payer holds back 24% of winnings over $5,000 and sends it to the IRS. It's a prepayment, not the final tax.
Winnings are ordinary income stacked on your other $60,000. Your top dollar lands in the 22% bracket.
Alabama taxes gambling winnings as ordinary income.
Tax owed ($12,850) minus what was withheld ($12,000). Set this aside. A large balance can also mean an underpayment penalty unless you make an estimated payment.
$50,000 minus $12,850 in federal and state tax: an effective rate of 25.7%.
An estimate for 2026, not tax advice. It treats this win as your only gambling income for the year and leaves out local income taxes. Nothing you enter leaves your browser.
The rules
- Alabama tax
- Alabama taxes lottery winnings as ordinary income at graduated rates from 2% to 5%.[1]
- Federal tax form
- Lottery prizes of $2,000 or more that are at least 300 times the ticket price are reported on a W-2G. The threshold was $600 before 2026.[2]
- Federal withholding
- 24% is withheld from lottery prizes of more than $5,000 (minus the ticket price). No 300x test applies to lotteries.[4]
- Alabama withholding
- No Alabama withholding requirement for lottery winnings. Tax is due when you file.[5]Unverified
- Gambling losses
- You can deduct losses only as an Alabama itemized deduction (Schedule A, line 25), up to the gambling winnings you report.[6]Unverified
- Visitors
- Alabama taxes nonresidents on lottery winnings won there, so visitors may need to file a nonresident return.[7]
- Where to play
- Alabama has no state lottery. A prize from a ticket bought in another state is still taxable income here.[5]
What you keep at different amounts
For a single filer with $60,000 of other income and no gambling losses, living and winning in Alabama.
| Won | W-2G | Withheld | Federal tax | State tax | You keep |
|---|---|---|---|---|---|
| $1,500 | No | $0 | $180 | $75 | $1,245 |
| $2,000 | Yes | $0 | $240 | $100 | $1,660 |
| $10,000 | Yes | $2,400 | $1,550 | $500 | $7,950 |
| $50,000 | Yes | $12,000 | $10,350 | $2,500 | $37,150 |
| $100,000 | Yes | $24,000 | $22,114 | $5,000 | $72,886 |
Assumes a $2 ticket price, so the 300x test is met at every amount shown.
Questions
- How much is Alabama tax on lottery winnings?
- Alabama taxes lottery winnings as ordinary income at graduated rates from 2% to 5%.[1]
- Does Alabama withhold tax from lottery winnings?
- Alabama has no withholding requirement for lottery winnings. Tax is due when you file.[5]Unverified
- Do visitors pay Alabama tax on lottery winnings?
- Alabama taxes nonresidents on lottery winnings won there, so visitors may need to file a nonresident return.[7]
More for Alabama
All of Alabama's gambling tax rules · Lottery in every state
Sources
- [1] Tax Foundation, State Individual Income Tax Rates and Brackets, 2026 · checked September 22, 2026
- [2] IRS, Instructions for Forms W-2G and 5754 (01/2026) · checked September 22, 2026
- [3] Federal Register, REG-113229-25 proposed rule (Apr. 17, 2026) · checked September 22, 2026
- [4] 26 U.S. Code § 3402 (withholding) · checked September 22, 2026
- [5] AGA State of the States 2025 (legal status as of Dec. 31, 2024) · checked September 22, 2026
- [6] Alabama 2025 Form 40 Booklet (Schedule A line 25 instructions) · checked September 22, 2026
- [7] Alabama 2025 Form 40NR Booklet · checked September 22, 2026