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Prizes that you win are simply added to your total other income for the year and you are then taxed according to what tax bracket that puts you in.
Obviously in the case of winning $1 million, this is going to place you in the very highest tax bracket possible, assuming that you receive the payout all in one year. That is why many lottery winners take the option to receive yearly payouts rather than receiving their winnings in a lump sum.
If you were to receive a $1 million prize all in one year, you would pay approximately $327,000 in federal taxes. If you live in the state of PA, you would also owe approximately $30,000 in PA state taxes.
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