The odds of winning a lottery jackpot are slim — 1 in 292.2 million for Powerball, according to the lottery. The IRS taxes lottery prizes differently depending on how the winner chooses to get paid. You'll also be in the highest federal income bracket and have to pay federal taxes you owe beyond that withholding. There's also the state tax billJust when you thought you'd paid the piper, here come state taxes. California residents face the highest state tax rate, which tops out at 13.3%, but state tax rates across the country vary, starting at 2.5%.