Your odds of winning the lottery may be slim, but if you DO hit the jackpot, you need to be prepared for the taxes that come with it. While you don't have to report lottery winnings of $600 or less, if you win more than $5,000, the government will hit you with a 25 percent federal withholding tax. However, California, Pennsylvania and states with no income tax (you go, New Hampshire), will not tax your lottery winnings. So before you spend all your winnings, remember that some of that cash belongs to Uncle Sam.

Win $400,000 or more for a single person or $450,000 for a couple and the tax rate jumps to, gulp, 39.6 percent.
If you live in Arizona, you'll be slammed with a 5 percent tax on the prize, while nonresidents will have to dole out 6 percent [source: Ellis]. It used to be 35 percent until the government almost went over the financial cliff in late 2012.
But, if on the off chance you do win millions in a lottery jackpot, keep in mind that the Internal Revenue Service will be looking for its fair share.

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