Can a Canadian Win the Powerball Lottery? What You Keep

On this page

1. Yes, a Canadian Can Play and Win Powerball
2. The Prize Is Claimed Where the Ticket Was Bought
3. Why the U.S. Withholds 30% From a Lottery Prize
4. State Withholding Can Come on Top
5. Nothing to Report in Canada, and No Credit Either
6. What a U.S. Return Can and Cannot Change
7. Where a Canadian’s Powerball Prize Goes, Layer by Layer
8. After the Win: The Paperwork and the Return
9. Frequently Asked Questions

You bought a Powerball ticket at a gas station on a U.S. trip, drove home across the border, and now the ticket is on your fridge. Can a Canadian win Powerball and keep the money? The ticket is valid wherever you live, and the prize is claimed in the state that sold it. Before anything is paid out, the federal rule for non-residents calls for 30% withholding, and state withholding can be added on top. This article explains how each layer works, why Canada neither taxes the prize nor credits the U.S. tax, and what a U.S. return can and cannot change afterward.

Yes, a Canadian Can Play and Win Powerball

The Powerball FAQ answers this directly. You do not have to be a U.S. citizen or resident to buy a ticket or win a prize. Powerball is run by the state lotteries that belong to the game, and their published rules set no nationality test for players. A Canadian is treated like any other ticket holder.

The FAQ does set conditions for buying. A visitor who meets the minimum age may buy a ticket, and that age is set by each selling jurisdiction, so it can differ from state to state. The ticket has to come from an authorized lottery retailer, and the buyer has to be in a jurisdiction that sells Powerball at the time. For most Canadians, that means buying in person on a trip south.

The Prize Is Claimed Where the Ticket Was Bought

Powerball is sold by member lotteries in U.S. states and territories. No single national office pays the prizes. The Powerball FAQ says a prize must be claimed in the jurisdiction where the winning ticket was bought. A Canadian who bought a ticket in Michigan claims it with the Michigan Lottery, even after returning to Canada, and that lottery’s rules and payment process apply.

The same FAQ warns that federal and jurisdictional income taxes may apply. Federal means U.S. tax collected for the IRS. Jurisdictional means tax set by the state or territory whose lottery sold the ticket. Each lottery publishes its own claim procedure, including what identification it asks for and how it handles tax on the payment.

So the tax picture starts with the lottery that pays the claim. It applies U.S. federal withholding under the rule for non-residents, plus any state withholding its own jurisdiction requires, and then reports the payment. The annual report that follows is explained in our guide to Form 1042-S.

Why the U.S. Withholds 30% From a Lottery Prize

The starting point is how the IRS classifies a lottery prize. IRS Tax Topic 419 lists lottery winnings as gambling income, alongside casino, raffle and racing winnings. It also says a prize that is not cash, such as a car or a trip, counts as income at its fair market value. So a Powerball jackpot and a smaller prize from the same draw are both gambling winnings.

IRS Publication 515 covers what a payer must do when that income goes to a non-resident alien. The rule is chapter 3 withholding at 30%, applied to the gross proceeds of U.S. gambling winnings. Gross means the prize itself. The payer does not subtract what you spent on tickets or net the prize against losses. Publication 515 exempts certain table games, but lottery prizes are not among them, so the lottery withholds 30% before the prize is paid.

The rule exists because a payer has no way to collect tax from a foreign resident later. U.S. residents report winnings on their own returns. A non-resident usually has no U.S. return on file, so the law puts the duty on the payer to take the tax at the source. The 30% is the statutory rate for this kind of income and does not depend on your income or circumstances.

The withholding is then reported on Form 1042-S, an annual form the payer issues for each recipient, income type and tax rate, and furnishes by March 15 of the following year. On the day a prize is claimed, you leave with the lottery’s claim paperwork. The 1042-S comes later and records the gross amount paid and the tax withheld. What Is IRS Form 1042-S? explains what it shows.

State Withholding Can Come on Top

The 30% federal withholding is not always the only amount taken from a prize. The state lottery that sold the ticket can apply its own income tax withholding at the same time. The two amounts go to two different governments under two sets of rules, and the lottery’s claim paperwork is where a winner sees both.

Michigan gives one checked example. The Michigan Lottery states that for non-U.S. residents, a prize over $600 is subject to 30% federal withholding plus 4.25% Michigan state withholding. Together, those two rates come to 34.25% of the prize before any payment is made. The 4.25% is Michigan’s own tax, set and collected by the state.

This article does not describe how other states treat a non-resident’s lottery prize. Rates, thresholds and whether a state withholds at all are set by each state, so the lottery that sold the ticket is the place to confirm what applies. For a broader look at state tax on gambling wins, see state tax withholding on casino winnings.

The tax treaty between Canada and the U.S. does not reach the state portion. Article II of the treaty lists the taxes it covers, and on the U.S. side that is federal income tax. State income taxes are outside it. So treaty provisions such as the gambling loss deduction under Article XXII(3) apply to the federal withholding only, and a federal return does not adjust anything a state withheld.

Nothing to Report in Canada, and No Credit Either

CRA Income Tax Folio S3-F9-C1, paragraph 1.16, treats a lottery prize won by an individual as a windfall. A windfall is not income for Canadian tax purposes, so it is not taxed. The CRA page for Canadian residents going south applies the same treatment to prizes won in a U.S. lottery. A Canadian resident who wins a Powerball prize therefore generally does not report it on the T1 return. CRA guidance treats someone whose gambling amounts to a business differently, and that is a separate question.

The credit side follows from that. A Canadian foreign tax credit exists to offset Canadian tax on foreign income so the same income is not taxed twice. A lottery prize that Canada does not tax creates no Canadian tax for the U.S. tax to offset. The CRA page says this directly: no credit is allowed for the U.S. tax withheld on these winnings. The article on the 1042-S on a Canadian tax return explains why.

This leaves the withholding with nowhere to go in Canada. It cannot be claimed back from the CRA, and it cannot reduce other Canadian tax. The only place it can be looked at again is a U.S. federal return, where the IRS compares the tax withheld with the tax the rules say is owed. State tax withheld on top is a separate matter outside the treaty. For how the CRA treats casino winnings more broadly, see are U.S. gambling winnings taxable in Canada?

What a U.S. Return Can and Cannot Change

A U.S. return does not switch off the 30% rule. It gives the IRS a return to recompute the tax on the prize using the rules that apply to a Canadian resident. Under Article XXII(3) of the tax treaty between Canada and the U.S., U.S. gambling losses for the same year can be deducted against the winnings. What Article XXII(3) allows is covered separately. U.S. Tax Recovery prepares and files the return for you.

The loss deduction has a ceiling. U.S. gambling losses can offset U.S. gambling winnings only up to the amount of those winnings. If the year’s losses are larger than its winnings, the net loss is not deductible. It does not reduce other income and does not create a refund on its own. Losing lottery tickets bought in the U.S. are wagers, so they can count as losses. When a prize is large and documented losses are small, the deduction changes only a small part of the tax.

The rule changed for tax years beginning after 2025. Section 165(d) of the Internal Revenue Code, as amended, allows only 90% of wagering losses as a deduction. For a 2026 or later tax year, even losses equal to the winnings leave part of the prize taxable. A return for an earlier year follows the rule that applied then, so the tax year matters when the figures are worked out.

Losses also have to be shown. The IRS standard is an accurate diary or similar record kept at the time, listing the date, place, type of wager and amounts won and lost, backed by tickets, receipts or statements. A casino win-loss statement is common support but is not the whole standard. What the return changes depends on documented losses, and the IRS decides what it accepts.

Where a Canadian’s Powerball Prize Goes, Layer by Layer

The table below follows a prize from the lottery office to the winner, one layer at a time. Each row names who applies the rule, what it says, and whether a later U.S. return can touch it. Four of the five layers are set by a rule before any return is filed. Only one row describes something a U.S. return can revisit, and even that depends on the records the winner kept and on what the IRS decides after review.

The state row uses Michigan because it is the only state figure checked for this article. The Michigan Lottery says it withholds 4.25% state tax from non-U.S. residents on prizes over $600, in addition to the 30% federal amount. Other states set their own rules and are not described here. Article II of the treaty limits it to U.S. federal income tax, which puts the state amount outside both the treaty and the federal return.

The last row is narrow. U.S. gambling losses can be deducted only up to the U.S. winnings, and for a tax year beginning after 2025 the rule counts 90% of wagering losses, so losses cannot remove all of the tax on a 2026 or later prize. A winner who bought one ticket and kept no other records has little to deduct. How the treaty treats gambling losses covers the deduction in more detail.

After the Win: The Paperwork and the Return

The paperwork starts at the lottery office. When a prize is claimed, the lottery that sold the ticket issues claim documents showing the prize amount and the tax taken out. That is a record of the payment, not the tax form. The annual Form 1042-S comes later, by March 15 of the year after the prize was paid, and reports the gross amount and the federal tax withheld. The lottery’s claim paperwork stays in your file as support.

Loss records matter too. A Canadian resident who claims the treaty loss deduction supports it with an accurate diary or similar record, plus the tickets, receipts or statements behind each entry. Losing lottery tickets help only when they can be matched to dated entries in that record. The documents checklist shows what each document proves.

A first claim usually needs an ITIN, because a non-resident without a Social Security number does not have a U.S. taxpayer identification number. U.S. Tax Recovery handles that application and prepares the return for you. We are an IRS Certifying Acceptance Agent, listed on the IRS’s Acceptance Agents directory for Canada. We are not affiliated with the IRS, and the IRS decides the outcome. How quickly it moves varies from case to case, as what happens after you file explains.

Frequently Asked Questions