Arkansas Lottery Tax Calculator - 6% State Tax

Arkansas imposes a flat 6% state income tax on all lottery prize money. On a $60 million lump-sum jackpot, this 6% equals $3.6 million in state taxes—an enormous amount that most winners don't anticipate. Arkansas's 6% rate is moderate nationally but still significant. States with no lottery tax (Alaska, Florida, Texas, Nevada, Washington, Wyoming, South Dakota, Tennessee, North Dakota, Delaware, New Hampshire) save winners millions, while Arkansas's 6% puts it in the middle-tier group alongside states like Georgia, Iowa, Kansas, Louisiana, Maine, Missouri, New Mexico, and Rhode Island.

Here's the math on a $100 million advertised jackpot: (1) Lump sum is ~60% = $60 million. (2) Federal tax at 37% = $22.2 million. (3) Arkansas state tax at 6% = $3.6 million. (4) Total taxes = $25.8 million. (5) Federal withholding already taken = $14.4 million (24%). (6) Additional tax due by April 15th = $11.4 million (the tax gap). This means you'd walk away with roughly $34.2 million after all taxes on a $100 million jackpot—a 66% reduction from the advertised amount due to federal (37%) + state (6%) + effective combined rate.

When you claim a lottery prize in Arkansas, two tax events happen: (1) The lottery immediately withholds 24% federally (required by IRS law), and (2) Arkansas withholds 6% for state taxes. However, your actual federal liability is 37%, so you have a $13 million tax gap on our $60 million example (37% owed vs. 24% withheld). The Arkansas 6% is held at the time of payment, so the full $3.6 million state tax is already deducted. Still, the federal gap requires a large payment by April 15th to avoid penalties and interest.

Arkansas taxes lottery winnings at 6% regardless of whether you take a lump sum or annuity. A lump sum means a one-time large payment subject to 37% federal tax plus 6% state tax all at once. An annuity spreads payments over 30 years, which can help with federal tax brackets but doesn't eliminate Arkansas's 6% state tax obligations year-over-year. Each annuity payment is subject to federal withholding and Arkansas state tax. Discuss with a CPA whether the lump sum or annuity better suits your financial situation, considering both federal and state tax implications.

The Arkansas Lottery, established in 2009, generates revenue that supports state education, scholarships, and various state programs. The 6% tax on lottery winnings is part of the state revenue model. Knowing that your taxes fund education and state services provides context, though it doesn't reduce your personal tax burden. Arkansas has steadily increased lottery participation over the years, and winners should be aware that state taxation is a core part of the system.

You cannot avoid Arkansas's 6% state tax on lottery winnings—it's mandatory. However, you can optimize other aspects: (1) Before claiming, consult a tax attorney about forming an LLC or trust to claim the prize (if permitted). (2) Work with a CPA experienced in federal lottery taxation to plan for the $13+ million federal tax gap on large wins. (3) Consider whether an annuity would reduce your annual federal tax bracket—spread income reduces marginal rates. (4) Plan investments post-claim to avoid pushing yourself into higher federal brackets. (5) If you move from Arkansas after claiming, verify new state tax obligations on future investment income and lottery payouts. (6) Don't claim immediately—professional planning before claiming can optimize the entire tax structure.

Arkansas's 6% lottery tax sits in the middle-tier nationally: (1) Zero tax states (8 total): Alaska, Delaware, Florida, Nevada, New Hampshire, North Dakota, South Dakota, Tennessee, Texas, Washington, Wyoming. (2) Lower rates (3-5%): Colorado (4%), Indiana (3%), Michigan (4%), Ohio (3%), Pennsylvania (3%), Arizona (5%), Illinois (5%), Kentucky (5%), Mississippi (5%), Missouri (6%). (3) Same as Arkansas (6%): Georgia, Iowa, Kansas, Louisiana, Maine, Missouri, New Mexico, North Carolina (5%), Rhode Island, Virginia, West Virginia (7%). (4) Higher rates (7-11%): Connecticut (5%), Hawaii (9%), Maryland (9%), Minnesota (9%), Montana (7%), Nebraska (7%), New Jersey (11%), New York (11%), Oregon (10%), South Carolina (7%), Utah (5%), Vermont (9%), Wisconsin (8%). Arkansas's middle-tier position means you're not in the most favorable tax situation (like Florida or Texas), but you're far better off than New Jersey (11%) or New York (11%) residents.