The federal tax overhaul that took effect this month includes a small change for lottery winners who claim prizes of more than $5,000. The federal withholding rate that applies to those prizes has decreased just a bit.
For years, the federal withholding rate that applied to lottery prizes of more than $5,000 was 25 percent. Under the new tax rates that took effect this month, that rate has been lowered to 24 percent. The state withholding rate remains unchanged at 5 percent for all Iowa Lottery prizes of more than $600.
So if you win a big lottery prize, a little bit less in withholdings will be deducted from your winnings.
We implemented the withholding change here at the Iowa Lottery on Monday (Jan. 29). So if you claimed a prize of more than $5,000 that day or claim one in the future, the new rate will now apply.