For example, if two people win a New Jersey Lottery prize of $14,000 and split the proceeds equally, $7,000 of income is taxable to each person and is subject to the 5% withholding rate. New Jersey Income Tax withholding is based on the total amount of the prize won. The withholding rates for gambling winnings paid by the New Jersey Lottery are as follows:
If a prize is taxable (i.e., over $10,000), the entire amount of the payout is subject to withholding, not just the amount in excess of $10,000. The rate is determined by the amount of the payout. New Jersey Income Tax is withheld at an amount equal to three percent (3%) of the payout for both New Jersey residents and nonresidents ( N.J.S.A.
