Are lottery prizes subject to taxes?

Yes, lottery prizes are subject to taxes in Arizona. Winners of Arizona State Lottery prizes are required to pay federal and state income taxes on their winnings. The lottery office withholds a certain percentage of the prize money before distributing it to the winner, as mandated by federal law. The specific amount withheld depends on the prize value and the winner's tax bracket. Additionally, winners may also be subject to other taxes such as estate or gift taxes if applicable. It is important for winners to consult with a tax professional to understand their individual tax obligations and to ensure proper reporting and payment of taxes on their lottery winnings.