Does California Tax Lottery Winnings? What's Taxed
California's own lottery prizes are free of state income tax. Almost every other kind of win is not.
No, California does not tax California Lottery winnings, including SuperLotto, Powerball and Mega Millions tickets bought from the California Lottery. But California does tax every other gambling win: casinos, card rooms, horse racing, sports bets, raffles and lottery prizes from other states. The IRS taxes all of it, California Lottery prizes included.
What California taxes and what it doesn't
| Winnings | California tax | Federal tax |
|---|---|---|
| California Lottery (Powerball, Mega Millions, SuperLotto, scratchers) | No | Yes |
| Another state's lottery | Yes | Yes |
| Casinos, including tribal casinos, and card rooms | Yes | Yes |
| Horse racing and other wagering | Yes | Yes |
| Raffles, sweepstakes and prizes | Yes | Yes |
The Franchise Tax Board puts it plainly: "We do not tax winnings from the California Lottery." On the return itself, the prize is included in your federal income and then subtracted on Schedule CA (540), line 8b. FTB's instructions add that there is no such adjustment for lottery winnings from other states: they are taxable by California.
How much federal tax you'll pay
Lottery prizes are ordinary income on your federal return, taxed at rates up to 37%. When the prize minus the cost of the ticket is more than $5,000, the payer withholds 24% for federal tax. The same withholding applies to sweepstakes and wagering pools, and to other wagers that pay at least 300 times the bet. Slot machine, bingo and keno wins don't have it.
On a big prize, 24% is usually too little. A single person with no other income who takes a $1,000,000 cash prize in 2026 owes about $320,000 in federal income tax, but only $240,000 is withheld, leaving roughly $80,000 due at filing. If that was a California Lottery prize, California tax is $0. The same win from another state's lottery or a casino would add about $103,135 of California tax.
Gambling losses
Gambling losses are deductible only if you itemize, and only up to the amount of your winnings. Starting with 2026, the federal deduction is also limited to 90% of your losses (IRS Publication 505). On your California return, losses on California Lottery tickets aren't deductible at all, since the winnings aren't taxed there: if you claimed them federally, you remove them on Schedule CA (540), Part II, line 16. Other gambling losses can be itemized on the California return up to your winnings.
Reporting winnings
- Report all gambling winnings on your federal Form 1040, including California Lottery prizes. Larger wins come with a Form W-2G.
- On your California return, subtract California Lottery winnings on Schedule CA (540), line 8b, column B. Other winnings stay in.
- Any California tax withheld shows in box 15 of the W-2G and goes on Form 540 with your other withholding.
A large taxable win can also mean you should make estimated tax payments for the year to avoid an underpayment penalty.
Run your numbers
Our Lottery Winnings Tax Calculator shows whether California taxes your win, estimates the state and federal tax on top of your other income, and the federal withholding.
Frequently Asked Questions
Does California tax Powerball and Mega Millions winnings?
Not if the ticket came from the California Lottery. The Franchise Tax Board says it does not tax winnings from the California Lottery, including SuperLotto, Powerball and Mega Millions. Federal tax still applies.
Do I pay California tax on a lottery ticket I bought in another state?
Yes, if you are a California resident. California only excludes California Lottery winnings; prizes from other states' lotteries are taxable on your California return.
Are casino winnings taxable in California?
Yes. Winnings from casinos (including tribal casinos), card rooms, horse racing, raffles and other gambling are taxable by California as ordinary income, at rates up to 13.3%.
How much federal tax is taken out of lottery winnings?
24% of the prize minus the ticket cost, when that is more than $5,000. On a large prize that usually isn't enough, because the top federal rate is 37%.
Can I deduct my losing lottery tickets?
On your federal return, gambling losses are deductible if you itemize, up to your winnings (and, from 2026, only 90% of the losses count). On your California return, losses on California Lottery tickets are not deductible, because California Lottery winnings aren't taxed. Other gambling losses are deductible for California the same way, up to your winnings, if you itemize.
This article is for general information only and is not tax advice. It covers California residents. Sources: FTB Gambling income page and Schedule CA (540) instructions; IRS Instructions for Forms W-2G and 5754 (Rev. January 2026).