States With No State Tax on Lottery Winnings (2026)

Federal tax comes first, and it comes everywhere

Before any discussion of states, it helps to fix the part that never changes. Lottery winnings are ordinary income to the federal government. For a large US jackpot, the operator withholds a flat 24% for federal tax at the moment you claim, and reports the prize to the Internal Revenue Service. That 24% is only a down payment: a jackpot pushes almost any winner into the top federal bracket, currently 37%, so the real federal bill is settled the following April and is usually larger than what was withheld. The rule is stated in IRS Topic no. 419, gambling income and losses, and we cover the mechanics in how lottery winnings are taxed.

This matters for reading everything below. When people say a state "does not tax lottery winnings", they mean the state adds nothing on top of the federal share. It never means the prize is tax-free. The most any state can do for you is refrain from taking a second bite.

The nine states with no income tax

The cleanest case is a state that has no personal income tax at all. If there is no machinery for taxing income, there is nothing to apply to a lottery prize. As of 2026 these states are Florida, Texas, Washington, Nevada, South Dakota, Wyoming, Tennessee, Alaska and New Hampshire.

A few of these carry footnotes worth knowing. Washington has no tax on wage or lottery income but does levy a capital-gains tax on high investment gains — that is a separate tax and it does not touch the prize itself. Tennessee and New Hampshire spent years taxing only interest and dividend income rather than wages; those narrow taxes have since been phased out, which leaves ordinary income, including a lottery prize, untouched. New Hampshire, notably, runs a state lottery of its own while imposing no income tax on the winnings.

For a resident of any of these states who buys a ticket at home and wins, the arithmetic is simple: federal tax, and then the rest is yours. There is no state form to file on the prize.

The two exemption states: California and Delaware

A second, smaller group has a normal state income tax but writes lottery winnings out of it. California is the best-known example. A Californian pays state income tax on wages and most other income, yet prizes from the California State Lottery are specifically exempt from California income tax. The exemption is narrow and worth reading precisely: it covers the California Lottery only. If a California resident wins a multi-state game the state treats that prize under the same exemption when it is administered as California Lottery product, but winnings from another state's lottery, or from casino and other gambling, remain taxable California income. The exemption is described by the operator itself, the California Lottery.

Delaware works on a similar principle. Delaware does not tax its state lottery winnings for residents, which places it alongside California as an income-tax state that still leaves the prize alone. As with California, the exemption is for the state's own lottery product, and the detail matters more than the headline.

The practical lesson from both is that "no lottery tax" and "no income tax" are different claims. California has a hefty income tax and still exempts its lottery; Texas has no income tax and so exempts everything by default. Both end at the same place for an in-state lottery prize, but for very different reasons.

The high end: New York and its neighbours

At the opposite extreme sits New York. The state income tax rises to 10.9% on the largest incomes, and a jackpot lands squarely in that band. New York is also one of the few places where local income tax stacks on top: a winner living in New York City pays a city income tax of roughly 3.9%, and Yonkers levies its own resident surcharge. Combine the top state rate with the city rate and a New York City resident can surrender close to 15% of the prize to state and local government — before the federal 37% is even applied.

Other states cluster below that but still take a meaningful slice. Maryland, New Jersey, Oregon, Minnesota and Washington, D.C. all sit in the higher tier, and most states with an income tax fall somewhere between roughly 3% and 8%. None of these is a scandal; they are the same rates residents pay on other large income. The point is only that geography moves the number a great deal, and the gap between a New York City winner and a Florida winner on the same jackpot runs to millions of dollars.

Residency and where the tax is actually owed

This is where intuition most often fails. Many people assume the tax follows the winner, so that winning big and then relocating to Florida solves the problem. For a lump sum, that is usually wrong. Most states tax a lottery prize on a source basis: the state where the ticket was bought and the prize was won gets to tax it, regardless of where the winner lives afterward. Buy a winning ticket in New York and move to Miami the next week, and New York can still assess its tax on that prize.

There is a genuine wrinkle for annuities. A jackpot taken as annual payments over decades is income received in each of those years, and a handful of states look at your residency in the year each payment arrives. That can, in specific circumstances, change the state treatment of later instalments. But the interaction between the source state and your new home state, credits for tax paid elsewhere, and each state's own rules make this genuinely complicated. It is not something to plan around a blog post; it is a question for a qualified tax adviser before you claim. Both payout routes are compared in our lump sum versus annuity payout guide, and the federal treatment of each year's payment sits in IRS Publication 525.

Two related traps are worth naming. First, buying tickets across a state line to chase a lower rate rarely helps, because the purchase state is usually the taxing state anyway. Second, a winner who is a resident of a taxing state but bought the ticket in a no-tax state may still owe their home state, since residents are typically taxed on income from all sources. The combinations get intricate fast, which is exactly why the honest answer to most residency questions is "it depends, and get advice".

What none of this changes

It is worth closing on the part that no map of tax rates can improve: the odds. State tax treatment decides how much of a prize you keep, never how likely you are to win one. The published jackpot odds for the big US games run into the hundreds of millions to one, and they are identical in Florida and in New York. A favourable tax state is a reason to smile after a win, not a strategy for producing one. No number system, app or subscription changes those odds either — the only variable a player actually controls is how much they spend and whether they treat a ticket as entertainment or as a plan. Those odds are published tier by tier, and we walk through them in Powerball odds explained by prize tier.

Estimating your own take-home

You can sketch the arithmetic without a spreadsheet, as long as you keep the pieces in order. Start from the advertised jackpot, which is the annuity figure — the total paid out over decades. If you take the lump sum, as most winners do, you begin from the cash value, which is substantially lower because it is the amount needed today to fund that annuity. From that cash value the operator withholds 24% for federal tax at claim time, and the real federal bill is trued up to the top bracket the following April. Only then does the state layer apply: nothing in the no-tax and exemption states above, and anywhere from a few percent to the New York ceiling everywhere else.

The order matters because people routinely anchor on the billboard number and are shocked by the cheque. A useful mental model is three cuts in sequence — annuity to cash, federal, then state — with only the last of those changed by geography. It also explains why the gap between a Florida winner and a New York City winner, while real and large, is smaller than the gap between the advertised jackpot and the lump-sum cash value. Both are worth understanding before you ever decide how to claim, and both are questions to run past a tax professional rather than a chart.