The tax rate on sweepstakes winnings can significantly impact the total amount a winner receives. In the United States, the IRS treats these winnings as ordinary income, meaning they are subject to federal income tax. The tax rate on sweepstakes winnings can vary based on the winner's overall income, potentially reaching up to 37% for high earners. Additionally, state taxes may apply, further reducing the net amount. It's essential for winners to understand their tax obligations to avoid unexpected liabilities when claiming their prizes.