Eight states won’t take a cut of your lottery winnings: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Seven of them have no state income tax at all, so lottery prizes are covered by that broader rule. California is the odd one out: it does tax income, but it specifically exempts state lottery prizes. Federal tax, though, applies wherever you buy your ticket.
The Seven No-Income-Tax States
Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming collect no state income tax on any kind of earnings. Wages, salary, jackpot — none of it shows up on a state return, because there is no state return to file. If you live in one of these states and buy a winning ticket there, the only income tax on the prize is federal.
Two of them joined the group fairly recently. New Hampshire used to tax interest and dividend income and repealed that tax in 2025. Tennessee phased out its Hall Income Tax on investment income effective January 1, 2021. Wages and lottery prizes were never in the base for either state.
California’s Lottery Exemption
California is the only state that runs a full income tax and still lets lottery winners off the hook. The state’s Franchise Tax Board confirms that California Lottery prizes, including multi-state games like Powerball and Mega Millions purchased through the California Lottery, are not subject to California income tax.1Franchise Tax Board. Gambling California’s top marginal rate is above 13%, so on a large prize, this exemption is worth a lot.
Read the exemption narrowly. It covers California Lottery prizes and nothing else. Other gambling income earned in California — casino winnings, sports betting proceeds — remains taxable at ordinary state rates.
States Without a Lottery at All
A separate group of states never comes up in the “tax on winnings” question because they don’t sell lottery tickets in the first place: Alabama, Alaska, Hawaii, Nevada, and Utah. There’s no in-state prize to tax.
That doesn’t mean residents of those states are tax-free if they win elsewhere. A ticket bought while visiting another state is taxed under that state’s rules, and the winner’s home state may want its share too. Alaska residents happen to be in the clear at the state level because Alaska has no income tax. Residents of Alabama and Hawaii, which do tax income, would still report out-of-state winnings on their home returns.
Federal Tax Applies No Matter Where You Win
The IRS treats lottery prizes as ordinary income, and that rule doesn’t care whether your state does or not.2Internal Revenue Service. Topic No. 419, Gambling Income and Losses Federal tax hits in two stages.
The 24% Withholding at Payout
For any lottery prize over $5,000, the lottery agency must withhold 24% before paying you. On a $1 million prize, $240,000 goes to the IRS before the check clears. The agency files Form W-2G with the IRS and sends you a copy showing both the prize and the tax withheld.3Internal Revenue Service. Instructions for Forms W-2G and 5754
The Rest of the Bill at Filing
The 24% is a down payment, not a final rate. Lottery winnings run through the same progressive brackets as wages, and for 2026 the top federal rate is 37%, starting at $640,600 for single filers and $768,700 for married couples filing jointly.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Any multi-million-dollar jackpot clears that threshold on its own, so most of the prize is taxed at 37%. The gap between 24% withheld and 37% owed comes due the following April, and on a large prize it can easily reach six or seven figures.
Winning in a State Where You Don’t Live
Buying a ticket on a trip can pull you into a tax system you’d otherwise never touch. Most states with an income tax treat lottery prizes won inside their borders as source income and tax nonresidents on them.
A Florida resident who wins Mega Millions on a ticket bought in New York owes New York state tax on that prize, even though Florida itself has no income tax. New York’s lottery agency withholds before paying out. New Jersey works the same way and taxes nonresident gambling winnings at the source.5State of New Jersey Department of the Treasury. Lottery and Gambling Winnings
If both the source state and the home state tax income, both have a claim on the winnings. The home state generally grants a credit for tax paid to the source state, so you don’t pay both rates in full. In practice, the total ends up at the higher of the two rates. Win in an 8% state while living in a 5% state, and your combined state tax is 8%, not 13%.
State withholding rates vary and are separate from the federal 24%. Some states withhold a flat rate that won’t match your actual liability. You settle up on the state returns you file for the year of the win.
City Taxes Can Take Another Slice
Even in a state that taxes lottery winnings, the state rate isn’t always the last word. A handful of cities run their own income taxes and don’t exempt gambling income. New York City withholds an additional 3.876% from resident winners on top of the state’s withholding.6New York Lottery. General Guidelines For a New York City resident on a large jackpot, the combined federal, state, and city load can approach half the prize.
Some cities in Ohio, Maryland, and parts of the mid-Atlantic also apply local income tax to gambling winnings. If your city has a local income tax, check whether lottery prizes fall inside its base before assuming the state rate is the whole picture.