Which US states exempt lottery winnings from state income tax in 2025?
Executive summary
As of early 2025, multiple public summaries list eight states that effectively leave lottery winnings untaxed at the state level: California (for state lottery prizes), Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — primarily because these states either have no broad personal income tax or explicitly exempt state-lottery prizes (counts and nuances vary by source) [1][2][3]. Reporting emphasizes federal taxation still applies (24% withholding and up to 37% final rate) and that local rules, residency and where the ticket was purchased can change the outcome [1][4].
1. Which states commonly appear on 2025 “no state tax on winnings” lists
Multiple state-by-state guides converge on the same set of states: Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming are commonly cited as having no state income tax (so lottery winnings aren’t taxed at the state level there), and California is repeatedly noted as exempting state lottery prizes specifically — producing an eight-state group most outlets list as “no state tax on lottery winnings” in early 2025 [1][2][3].
2. Why those states don’t tax lottery winnings — two different legal reasons
There are two distinct legal reasons bundled under the “no state tax” label. First, several states simply do not levy a broad personal income tax (Florida, South Dakota, Tennessee, Texas, Washington, Wyoming), so ordinary income — including lottery payouts — isn’t taxed by the state [2]. Second, California doesn’t tax its own state lottery prizes even though it has a state income tax, a carve‑out that applies to in‑state lottery products [3]. New Hampshire is a special case: it generally taxes only interest and dividends, so wage‑type income (including lottery winnings) isn’t taxed the same way [2].
3. Federal tax remains the primary bite on big prizes
All sources underline that federal taxation always applies: the lottery agency will withhold 24% for U.S. residents on large prizes and winners could face up to the top federal rate (37% in 2025) when they file their return [1][4][5]. State exemptions do not affect this federal obligation [4].
4. Buying vs. living — where you pay state tax can depend on circumstances
Guides warn that the state that withholds or ultimately applies tax can depend on where you bought the ticket and where you live. Some states withhold at purchase for nonresidents; others tax residents on worldwide income and may claim tax on winnings even if the ticket was bought elsewhere [1][6][7]. State rules vary; winners often face interplay between the taxing rights of the purchaser state and the home state’s tax rules [1][6].
5. Nuances, exceptions and differing editorial framings across outlets
Not every outlet phrases the list identically. Some emphasize “states that don’t withhold” (WorldPopulationReview) while others emphasize “states with no income tax” or “states that exempt state lottery prizes,” so how the list is described can vary by editorial focus [1][2][3]. For example, WorldPopulationReview frames the list as states that “do not have lottery winnings withheld,” which is an administrative distinction distinct from substantive tax liability [1]. FileLater and Jackpot make explicit the California exemption for state lottery prizes as an important anomaly [3][2].
6. Practical takeaways if you win (or are planning where to claim)
Winners should expect federal withholding and possible additional federal tax when filing (24% withheld; up to 37% final), and should consult the specific lottery’s rules and state tax law before claiming — residency, where you purchased the ticket and whether the prize is a state versus multi‑state game can change state treatment [4][1][6]. Several outlets also frame relocation or timing strategies as theoretical ways to affect state tax exposure, but the precise legal and timing rules are state‑specific and require professional advice [8].
7. Limitations of available reporting and what the sources do not resolve
Available sources provide consistent lists and general rules but do not supply full statutory texts or cover every edge case (e.g., local taxes, municipal surtaxes, detailed cross‑state credit rules, and how nonresident winners are treated in every jurisdiction). For these unresolved points, the sources recommend consulting tax professionals and the specific state lottery or tax authority [1][4][8].
Bottom line: Most widely cited 2025 summaries put California (for state lottery prizes), Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming in the “no state tax on lottery winnings” column, but federal taxes still apply and state residency/purchase rules can change the result — consult state statutes or a tax advisor for a final determination [1][2][3].