Which States Have No Tax on Lottery Winnings?

Federal tax on lottery winnings is the same no matter where you live — the IRS withholds 24% up front on prizes over $5,000, with the true liability potentially reaching the top federal bracket depending on the winner's total income for the year. Where things diverge sharply is state tax, and the difference between the best and worst states can run into the tens of millions of dollars on a large jackpot.

The states that charge nothing

Several states consistently show up as charging zero state tax on lottery winnings, including Florida, Texas, Washington, Tennessee, South Dakota, Wyoming, and New Hampshire — most of these simply have no state income tax at all. California and Delaware are notable exceptions worth knowing about: both states do have a general income tax, but each specifically exempts lottery winnings by law. A handful of other states are sometimes included in 'no-tax' lists but don't actually sell Powerball or Mega Millions tickets, so they're not practically relevant to a multi-state jackpot winner.

Where you buy matters — but so does where you live

State withholding is generally based on where the winning ticket was purchased, not where the winner lives. But most states also tax their residents on income earned anywhere, so a resident of a high-tax state who buys a ticket in a no-tax state may still owe their home state's tax when filing — usually with a credit for any tax already withheld elsewhere. The genuine tax advantage of a no-tax state typically requires actually living there, not just buying a ticket there.

The most expensive place to win

New York is consistently cited as the highest state lottery tax rate in the country, at roughly 10.9%, with New York City residents facing an additional local tax on top of that — pushing the combined rate close to 15% for city residents.

None of this is tax advice, and exact rates and rules shift over time — always confirm current figures and get guidance from a qualified tax professional before making any decision based on where you live or where you buy a ticket.