Most states require you to pay taxes on gambling winnings. Of course, some states are friendlier than others when it comes to taxing your wins.

Certain places don’t charge any taxes when you win in gambling. You definitely want to consider betting in these states when you have the opportunity.

You will have to pay state income tax on your winnings in 39 states. If you live in one of the 11 states that don’t tax sweepstakes prizes, you may be spared state income taxes. Alaska, Florida. Next in line is the federal tax bill. Your lottery winnings are taxed just as if they were an ordinary income bonus. This means your income will be pushed into the highest federal tax rate, which is 37%. There is no way you can work around this—the U.S. Government does not give tax breaks to even the luckiest people in the country.

But what are the states that don’t tax gambling winnings? Of the states that do tax, which ones don’t charge you much?

This page discusses where you can gamble tax-free (minus federal taxes). It also covers what else you should know regarding taxes on real money gambling.

States That Don’t Tax Your Gambling Winnings

Tax Casino Winnings Usa Free

If you look at the gambling laws by state, nine states don’t collect taxes from your betting wins. That said, you’ll want to keep the following places in mind when planning your next gambling trip.

Alaska

The Last Frontier doesn’t offer many gambling opportunities on its frontier. Alaska only provides legal casino cruise ships, bingo, and pull tabs. At least you don’t need to pay state taxes when winning through any of these activities, though.

Delaware

Tax Casino Winnings Usa Online

With fewer than 974,000 residents, The First State isn’t overly large. Nevertheless, it does offer a thriving gaming industry that includes three racinos.

Florida

The Sunshine State boasts tribal casinos, poker rooms, and racetracks. Floridians also enjoy a 0% tax when winning at these gambling establishments.

Nevada

With over 440 casinos, Nevada’s gaming industry needs no introduction.

The Silver State won’t level state taxes on any of the big jackpots you win in Las Vegas, Reno, Laughlin, or elsewhere.

New Hampshire

The Granite State offers a few charity casinos and sportsbooks. You won’t need to pay taxes to New Hampshire when beating the bookies or casinos.

South Dakota

South Dakota may not have the largest population (885k). But it still offers 45 casinos and a bustling gaming destination in Deadwood.

Texas

The Lone Star State boasts one of the largest populations with 29 million residents. However, it doesn’t offer an abundance of gambling options compared to its big population. Texas features a few casinos (Class II only), horse tracks, and charity gaming venues.

Washington

The Evergreen State features a harsh stance on online gambling that includes felony charges. Nevertheless, it does offer some betting opportunities, including tribal casinos, poker rooms, and racetracks.

Wyoming

Wyoming is the smallest state in terms of population (579k). It still provides some gaming venues, though, including charity casinos, horse tracks, and poker rooms.

States With Low Tax Rates on Gambling Wins

Most states do tax you to some degree regarding winnings, and some states have a high gambling tax. However, the following ones don’t take much from you.

Arizona

The Grand Canyon State provides tribal casinos, horse tracks, and charity gaming. Arizona features a relatively low 4.54% tax rate on gambling wins.

Indiana

The Hoosier State features several casinos, multiple sportsbooks, and regulated online betting. Indiana taxes winnings at a 3.23% rate.

Michigan

Michigan offers 26 casinos, including three commercial venues in Detroit and 23 tribal establishments throughout the state.

It also features sports wagering and legal online gambling sites. The Wolverine State only charges a 4.25% tax rate on winnings.

North Dakota

Out of the states that tax winnings, North Dakota does it to the smallest degree at 2.90%. The Roughrider State provides tribal casinos, charity casinos, and lotteries.

Pennsylvania

Pennsylvania has become a mini-Las Vegas with 12 casinos along with poker rooms and sportsbooks. It only charges a 3.07% tax rate on gambling wins.

What If You Win in a State That Taxes Casino Winnings?

Only nine states let you off the hook regarding income tax on winnings. Odds are, you live in a state that taxes gambling profits.

Most places feature between a 5% and 6% rate. Therefore, you may not be overly concerned about what’ll happen when/if you win. Of course, you should plan beforehand just in case you’re successful. You want to give as few of your winnings away as possible.

That being said, take surrounding states and their taxes into consideration. Provided you live in/near a state with no, or low, gambling taxes, then you’re in good shape.

Federal Taxes Always Apply

Earlier, I covered nine states that don’t tax your wins in casinos, sportsbooks, poker rooms, etc. Even if you hail from one of these places, though, you still need to cover federal taxes.

Uncle Sam taxes your gambling winnings at 24%. This percentage is almost double the top rate in California (13.3%), which features the highest top-end gambling tax out of any state.

The federal government doesn’t expect you to only report jackpots or highly profitable years. It wants you to report every penny earned through gambling.

Of course, the IRS almost assuredly won’t hound you over a $10 winning Super Bowl bet against your friend. They will, however, care when you’re hitting jackpots and making serious profits.

A State Can Withhold Federal Taxes From Your Casino Wins

States are supposed to withhold federal taxes from large gambling payouts. Their casinos and sportsbooks will also issue a W-2G form if the win is big enough.

You need to fill this form out and give it to the gambling establishment. They’ll turn around and send it to the IRS before releasing your winnings.

Here are the guidelines on when bookmakers/casinos/poker rooms hand you a W-2G:

$5,000+ payout in a poker tournament.
$1,500+ payout in keno.
$1,200+ payout through a slot or video poker machine.
$600+ payout for a winning horse or sports bet (if win is 300x your stake).

Gambling Losses Are Deductible

As covered before, the IRS and state governments want you to report every dollar earned through gambling. However, you can deduct losses from winnings.

Everything that you wager and lose en route to winning counts as itemized deductions. These deductions reduce the amount of taxable income you’ll owe.

Here’s an example:

You win $2,500 through a slot machine.
You must report $2,500 under “other income.”
You spend $1,700 to win this amount throughout the year (itemized deductions).
$2,500 – $1,700 = $800 in reportable income.

You should record all of your gambling sessions for tax purposes. If the IRS ever comes calling for an audit, you’ll want evidence of your wins and losses.

The IRS may not always take your word for everything. You should keep as much evidence of your gambling activities as possible. Some items that you’ll want to keep include bank statements, betting tickets, check copies, and W-2G forms if you have them.

The more information you possess, the better chance you stand of passing an audit with flying colors.