Nine states impose no tax on gambling winnings because they levy no personal income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Two additional states, California and Pennsylvania, exempt state lottery prizes specifically but still tax other gambling income. Those are the states with no gambling tax on winnings at the state level. Federal tax is a separate matter and applies to every dollar you win, regardless of where you live or where you placed the bet.
The Nine States That Take Nothing
The cleanest way to keep state tax collectors away from a jackpot is to live in a state without a personal income tax. As of 2026, those nine states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.1Tax Foundation. State Individual Income Tax Rates and Brackets With no personal income tax on the books, these states have no mechanism to touch your casino payout, sports bet win, or poker tournament prize.
New Hampshire is the newest name on the list. The state previously taxed interest and dividend income and accelerated the repeal of that tax to January 1, 2025, ending state income tax of any kind for residents.2New Hampshire Department of Revenue Administration. Technical Information Release TIR 2025-001 The interest and dividends tax never reached gambling winnings anyway, but the full repeal removes any doubt.
Washington needs a quick clarification. The state enacted a 7% capital gains tax on investment sales, but capital gains and gambling winnings are treated differently under tax law. Gambling income is ordinary income, and Washington has no tax on ordinary income.1Tax Foundation. State Individual Income Tax Rates and Brackets A slot payout in Seattle is not subject to the capital gains tax.
These nine states raise revenue through property taxes, sales taxes, excise taxes, and, in Alaska’s case, oil revenue. Sales and property taxes in some of them run higher than the national average. That tradeoff, though, doesn’t touch your gambling winnings.
Two States That Exempt Only Lottery Prizes
Two states with an income tax carve out a specific exemption for their own state lottery while still taxing other gambling.
California’s exemption dates to 1984, when voters passed a constitutional amendment creating the state lottery. The initiative barred state and local governments from taxing lottery ticket sales or lottery winnings. Win a Mega Millions jackpot on a California ticket and the state takes nothing. Win at poker in a California card room and those winnings are taxable on your state return.
Pennsylvania works the same way through its State Lottery Law, which provides that no state or local taxes may be imposed on prizes awarded by the state lottery.3Pennsylvania General Assembly. Act of Aug. 26, 1971, P.L. 351, No. 91 – State Lottery Law Winnings from Pennsylvania casinos, slot machines, and table games remain subject to the state’s flat income tax rate. The exemption is strictly for state-run lottery games.
Delaware is sometimes lumped in with these states, but that’s a misread. Delaware does not withhold tax from lottery payouts at the point of sale, which creates the appearance of an exemption. The Delaware Lottery’s own guidance makes clear that all winning lottery tickets are subject to Delaware income tax. The winnings simply get reported and taxed on your annual return rather than withheld up front.
Winning in a State You Don’t Live In
Living in a no-income-tax state doesn’t fully protect you if you gamble in a state that does tax winnings. Most states with an income tax require nonresident winners to file a return and pay tax on gambling income earned inside their borders. Live in Texas, hit a jackpot in New York, and New York can tax those winnings.
If your home state also has an income tax, it will generally offer a credit for taxes you paid to another state on the same income, so you aren’t taxed twice. If your home state has no income tax, there’s no credit to claim, because you wouldn’t have owed your home state anything. You simply pay whatever the other state charges.
Withholding rates vary by state, and some withhold automatically from large payouts to nonresidents. Knowing the destination state’s rules before a gambling trip saves an unpleasant surprise at tax time.
The Worst States for Gamblers
At the other extreme, some states tax your gross gambling winnings and refuse to let you offset those winnings with losses. Federal law lets you deduct gambling losses against winnings if you itemize, but roughly a dozen states ignore that offset. Connecticut, Illinois, Indiana, Kansas, Louisiana, Massachusetts, North Carolina, Ohio, Rhode Island, Vermont, and Wisconsin all tax gambling winnings without a meaningful loss deduction.
The impact is severe. Say you visit a casino in one of these states, win $8,000 in the afternoon, and lose $7,000 by evening. Your net gain is $1,000, but the state taxes you on the full $8,000. Massachusetts allows loss deductions, but only from Massachusetts-licensed gaming establishments; losses from a Las Vegas trip or an online sportsbook licensed elsewhere don’t count.
If you live in one of these states and gamble regularly, this rule costs more than the headline tax rate.
Federal Tax Still Applies Everywhere
State exemptions don’t stop the IRS. Under federal law, gross income includes income from all sources.4Office of the Law Revision Counsel. 26 U.S. Code 61 – Gross Income Defined The IRS treats all gambling winnings as ordinary income and requires you to report them, even when no Form W-2G is issued.5Internal Revenue Service. Topic No. 419, Gambling Income and Losses
For large payouts, the casino or sportsbook withholds 24% before you’re paid. Mandatory withholding kicks in when winnings minus the wager reach $5,000 or more from a sweepstakes, wagering pool, or lottery.6Internal Revenue Service. Instructions for Forms W-2G and 5754 That 24% is a prepayment. Depending on your total income for the year, you could owe more when you file or get some back.
Federal loss deductions come with real limits. You must itemize on Schedule A, and your loss deduction can never exceed your winnings for the year.7Internal Revenue Service. Gambling Income and Expenses Starting in tax year 2026, federal law also caps gambling loss deductions at 90% of losses rather than the full amount.8Office of the Law Revision Counsel. 26 U.S. Code 165 – Losses Even a break-even gambler will owe federal tax. Win $10,000 and lose $10,000 in the same year, and you can deduct only $9,000 of those losses, leaving $1,000 in taxable gambling income.
So the state answer is straightforward: nine states take nothing because they tax no income, and two more exempt only their own lottery. The federal answer is the same in all of them.