Updated for the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) - The OBBBA's 90% gambling loss cap (TY2026+) interacts differently with each state's rules. States with rolling IRC conformity may inherit the 90% cap automatically. NJ did not adopt it. Last reviewed: March 2026 by Greg Monaco, CPA
In This Article
- The three tiers of states for gamblers
- The top 15 gambling states in detail
- Master comparison table (all 50 states)
- How the OBBBA 90% cap interacts with state rules
- Planning strategies based on state rules
- Worked dollar example: same bettor in four different states
- Frequently asked questions
Where you live determines how much of your gambling winnings you keep. A bettor who wins $100,000 and loses $95,000 owes zero state tax in Nevada - but could face a $6,990 bill in Connecticut on the full $100,000 of gross winnings. This guide compares all 50 states.
The Three Tiers of States for Gamblers
Tier 1: No Income Tax (9 States)
These states impose zero state income tax on gambling winnings:
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
Nevada and Florida are particularly notable given their massive gambling industries. Washington's 7% capital gains excise tax does NOT apply to gambling. New Hampshire fully phased out its Interest & Dividends Tax as of January 1, 2025.
Tier 2: States Allowing Loss Deductions (~31 States)
These states generally follow the federal framework - losses deductible if you itemize, up to the amount of winnings. New Jersey and a few others offer even better treatment through netting or special provisions.
Tier 3: States Denying ALL Loss Deductions (~10 States)
These states tax gross gambling winnings with no mechanism to offset losses:
Connecticut, Illinois, Indiana, Kansas, Louisiana, North Carolina, Ohio, Rhode Island, Vermont, Wisconsin
Massachusetts belongs in a subcategory: it allows losses only from MA-licensed gaming establishments.
A gambler who wins $100,000 and loses $100,000 (net: $0) owes zero state tax in Tier 1 and most Tier 2 states, but up to $6,990 in Connecticut (6.99% on gross $100K).
The Top 15 Gambling States in Detail
New Jersey - The Gold Standard (100% Netting)
- Rates: 1.4% to 10.75% (graduated)
- Loss deduction: Full 100% netting on NJ-1040 Line 24 (N.J.S.A. 54A:5-1(g)). No itemizing required
- OBBBA 90% cap: NJ did NOT adopt - 100% netting preserved
- Withholding: 3% on casino/sportsbook when federal withholding triggers. Lottery: 5% ($10K-$500K), 8% ($500K+)
- Lottery exemption: Prizes $10,000 or less exempt from NJ GIT
- Nonresidents: Taxed on NJ-source gambling; benefit from netting rule
- Key advantage: Break-even gambler owes $0 NJ tax even when owing federal phantom income tax under the 90% cap
Nevada - Zero State Tax
- No personal income tax. No state withholding. No filing requirement. Federal rules still apply.
Pennsylvania - Flat 3.07% With Wager-Cost Netting
- Rate: Flat 3.07%
- Loss deduction: Wager costs deductible directly on Schedule T without itemizing. Broader expenses (travel, lodging) NOT deductible
- Lottery: Taxable since January 1, 2016 (Act 84)
- City tax: Philadelphia residents face additional ~3.44% wage tax
New York - High Rates + City Tax
- Rates: 4% to 10.9% (9 brackets). NYC adds 3.078%-3.876%. Combined: up to ~14.8%
- Loss deduction: Itemization required. NY standard deduction ($8,000 single / $16,050 MFJ) is low - many gamblers lose the deduction
- Lottery withholding: ~8.82%
Connecticut - Worst State for Resident Gamblers
- Rates: 2% to 6.99%
- Loss deduction: NONE. Zero. A net loser pays tax on gross winnings
- Double penalty: Residents cannot claim credit for taxes paid to other states on gambling
- One advantage: Nonresidents pay NO CT tax on gambling winnings (Mohegan Sun, Foxwoods)
Pending CT Legislation - SB 183 (2026 Session): Connecticut Senate Bill 183, introduced February 11, 2026, would establish a personal income tax deduction for gambling losses for the first time, moving CT from Tier 3 (no deduction) to Tier 2 (losses allowed up to winnings). Status as of May 2026: introduced in the CT Senate; not yet passed either chamber. The bill is silent on whether CT would conform to the OBBBA 90% federal cap or preserve 100% netting. CT residents with material 2026 gambling activity should track SB 183 - retroactive applicability to TY2026 is possible if enacted before year-end.
California - High Rates, Federal Conformity
- Rates: 1% to 13.3% (highest single-state income tax rate; combined NY State 10.9% + NYC 3.876% exceeds CA for NYC residents)
- Loss deduction: Follows federal - itemization required, losses up to winnings
- Lottery: CA Lottery exempt from state tax; other state lotteries taxable
- OBBBA conformity: Rolling - 90% cap likely inherited automatically
Illinois - Flat Rate, No Loss Deduction
- Rate: Flat 4.95%
- Loss deduction: NONE. Illinois taxes gross gambling winnings
- A $50K winner who lost $50K owes $2,475 in IL tax on zero actual profit
Michigan - Standard With Tribal Complexity
- Rate: Flat 4.25%
- Loss deduction: Follows federal (itemization required)
- Special: MI has the most comprehensive session method definitions per RAB 2022-22 - cited by federal practitioners nationwide
Indiana - Flat Rate, No Loss Deduction (Updated for SB 243)
- Rate: Flat 3.05% state income tax (plus county-level local income tax)
- Loss deduction: NONE - Indiana taxes gross gambling winnings; no offset for losses
- OBBBA conformity: SB 243 (signed March 5, 2026) updated Indiana's IRC conformity date to January 1, 2026, bringing IN into general conformity with OBBBA. Indiana decoupled from several provisions including §163(j)(1) (business interest), §168(k) and new §168(n) (bonus depreciation), and §§174/174A (R&E). For gambling specifically, IN will likely inherit the OBBBA 90% loss cap at the federal-AGI starting point - but because IN already disallows all loss deductions, the practical impact for casual IN gamblers is zero (already worse than the 90% cap).
Indiana SB 243 - New Gambling Withholding Threshold (Retroactive to Jan 1, 2026): SB 243 raised Indiana's gambling withholding threshold to a uniform $2,000 across all four categories - keno, slot machines, lottery prizes, and charity gaming prizes - retroactive to January 1, 2026. Beginning in 2027, the threshold automatically adjusts to match the federal IRC §6041(h) inflation adjustment, keeping IN aligned with the federal W-2G threshold going forward.
Indiana 2026 Tax Amnesty (Limited Window): SB 243 expanded Indiana's 2026 amnesty program to cover tax liabilities for periods ending before January 1, 2024. Eligible taxpayers - including those with unreported pre-2024 IN gambling winnings - can settle qualifying liabilities penalty-free, interest-free, and collection-fee-free during a tight window:
- Amnesty window: July 15 - September 9, 2026 (no extensions, even for hardship)
- Payment deadline: Liabilities paid in full by Sept 9, 2026, OR payment plan completed by June 7, 2027
- Eligibility tool: Available on the IN DOR's INTIME site beginning May 18, 2026
- Consequence of not participating: Eligible non-participants face double penalties on amounts owed
Practical takeaway: IN gamblers with unreported pre-2024 winnings should evaluate amnesty eligibility immediately - the penalty waiver alone is often worth more than the underlying tax for small-dollar W-2G non-reporters.
Ohio - No Loss Deduction
- Rates: Flat 3.5% above $26,050 exemption
- Loss deduction: NONE
Colorado - Flat Rate, Federal Conformity
- Rate: Flat 4.4%
- Loss deduction: Follows federal (itemization required, likely inherits 90% cap)
Arizona - Flat Rate, Growing Market
- Rate: Flat 2.5%
- Loss deduction: Follows federal (itemization required)
- Fastest-growing sports betting market 2024-2026
Massachusetts - Unique Restriction
- Rate: Flat 5%
- Loss deduction: Only losses from MA-licensed Chapter 23K gaming establishments. Out-of-state gambling losses NOT deductible
Virginia - Standard With Economic Nexus
- Rates: 2% to 5.75%
- Loss deduction: Follows federal (itemization required)
- State 1099-K threshold: $600 (lower than federal $20,000)
Louisiana - No Loss Deduction + Local Surtaxes
- Rates: Flat 3% (effective for tax years beginning on or after Jan 1, 2025; graduated brackets repealed)
- Loss deduction: NONE
- Local parish taxes add 1-6% depending on jurisdiction
Master Comparison Table
| State | Top Rate | Loss Deduction? | OBBBA 90% Cap? | Nonresident Filing? |
|---|---|---|---|---|
| Alaska | 0% | N/A | N/A | No |
| Florida | 0% | N/A | N/A | No |
| Nevada | 0% | N/A | N/A | No |
| New Hampshire | 0% | N/A | N/A | No |
| South Dakota | 0% | N/A | N/A | No |
| Tennessee | 0% | N/A | N/A | No |
| Texas | 0% | N/A | N/A | No |
| Washington | 0% | N/A | N/A | No |
| Wyoming | 0% | N/A | N/A | No |
| New Jersey | 10.75% | 100% netting (no itemizing) | No - preserved 100% | Yes |
| Pennsylvania | 3.07% | Wager costs (Schedule T) | Pending conformity review | Yes |
| Arizona | 2.5% | Federal conformity | Likely yes | Yes |
| Colorado | 4.4% | Federal conformity | Likely yes | Yes |
| Michigan | 4.25% | Federal conformity | Likely yes | Yes |
| New York | 10.9% | Itemized only | Likely yes | Yes |
| California | 13.3% | Itemized only | Likely yes | Yes |
| Connecticut | 6.99% | NONE | N/A | No (nonresidents exempt) |
| Illinois | 4.95% | NONE | N/A | Yes |
| Indiana | 3.00% (2025) / 2.95% (2026) | NONE | Likely yes (SB 243) | Yes |
| Kansas | 5.7% | NONE | N/A | Yes |
| Louisiana | 3% (flat) | NONE | N/A | Yes |
| North Carolina | 4.5% | NONE | N/A | Yes |
| Ohio | 3.5% | NONE | N/A | Yes |
| Rhode Island | 5.99% | NONE | N/A | Yes |
| Vermont | 8.75% | NONE | N/A | Yes |
| Wisconsin | 7.65% | NONE | N/A | Yes |
| Massachusetts | 5% | MA-licensed only | Partial | Yes |
How the OBBBA 90% Cap Interacts With State Rules
States That Likely Inherit the 90% Cap
States with rolling IRC conformity (using federal taxable income as the starting point) will likely absorb the 90% cap automatically unless they pass decoupling legislation. This includes most states that allow loss deductions. As of March 2026, most states have NOT yet issued specific OBBBA conformity guidance.
States Where the 90% Cap Doesn't Matter
- No-income-tax states (9): No state impact regardless
- No-loss-deduction states (10): Already worse than 90% - they allow 0% deduction
- NJ: Explicitly preserved 100% netting; NJ has 'selective' conformity and did NOT adopt the 90% cap
The NJ Advantage Quantified
A break-even bettor with $100,000 in wins and $100,000 in losses:
- Federal (2026): $10,000 phantom income → ~$2,400 tax at 24%
- NJ: $0 tax (100% netting)
- Connecticut: $6,990 tax (zero loss deduction on $100K gross)
- Illinois: $4,950 tax (zero loss deduction on $100K gross)
- Nevada: $0 tax (no income tax)
Warning: Some tax software may incorrectly apply the federal 90% cap to NJ returns. Verify that your NJ-1040 Line 24 shows full netting, not the federal 90%-capped amount.
Planning Strategies Based on State Rules
- NJ residents: Take full advantage of the 100% netting rule. Your NJ tax on gambling can be $0 even when you owe federal phantom income tax
- Residents of no-loss-deduction states: Consider whether professional gambler status (Schedule C) provides any state-level benefit - in most cases, it doesn't because the state already taxes gross
- Multi-state gamblers: Track which state each gambling activity occurred in. Credits for taxes paid to other states (Schedule NJ-COJ for NJ residents) can prevent double taxation
- Relocating: If gambling is a significant income source, state tax treatment should factor into residency decisions. The difference between NJ (100% netting) and CT (0% deduction) can be tens of thousands annually
Worked Example: Same Bettor, Four Different States
Meet James, a sports bettor who earns $120,000 from his day job and had the following gambling results in 2025: $75,000 in wins and $72,000 in losses across DraftKings, FanDuel, and BetMGM. His net economic result is a $3,000 profit.
James's State Tax Comparison (TY2025)
| State | Gambling Income | Loss Deduction | State Taxable Gambling Income | State Tax on Gambling |
|---|---|---|---|---|
| New Jersey | $75,000 - $72,000 = $3,000 net (Line 24) | 100% netting, no itemizing | $3,000 | ~$191 (at the 6.37% marginal bracket) |
| Nevada | N/A | N/A | $0 | $0 (no income tax) |
| Connecticut | $75,000 gross | NONE allowed | $75,000 | ~$5,243 (at 6.99%) |
| New York | $75,000 gross if standard; $3,000 if itemized | Only if itemized | $3,000 - $75,000 | $183 - $4,575 |
Federal Return (Same for All States)
| Line | Amount |
|---|---|
| Gambling income (Schedule 1, Line 8b) | $75,000 |
| Gambling losses (Schedule A, Line 16) | ($72,000) |
| Net federal gambling income | $3,000 |
| Federal tax on $3,000 at 24% bracket | ~$720 |
The Cost of Living in the Wrong State
James's total tax on a $3,000 gambling profit:
| State | Federal Tax | State Tax | Total |
|---|---|---|---|
| Nevada | $720 | $0 | $720 |
| New York (itemized) | $720 | $183 | $903 |
| New Jersey | $720 | $191 | $911 |
| Connecticut | $720 | $5,243 | $5,963 |
Connecticut costs James $5,052 more than NJ on the same $3,000 profit - because CT taxes gross winnings with no loss deduction.
2026 Comparison: The 90% Cap Across States
Under the OBBBA's 90% cap (Section 70114), James's federal return changes. His $72,000 in losses are capped at $64,800 (90% x $72,000). Federal taxable gambling income: $75,000 - $64,800 = $10,200 phantom income. Federal tax: ~$2,448 at 24%. NJ still nets to $3,000 (100% netting preserved). Connecticut still taxes $75,000 gross. The 90% cap widens the gap: NJ saves James $1,728 in federal-equivalent state tax compared to a state that adopted the 90% cap at the state level.
Frequently Asked Questions
Which state is best for sports bettors?
For bettors who break even or have moderate wins, New Jersey offers the best treatment of any state with an income tax - 100% netting without itemizing, plus the OBBBA 90% cap doesn't apply. For pure tax minimization, no-income-tax states (NV, FL, TX, WY, etc.) are unbeatable.
I live in a no-loss-deduction state. Can I move to NJ to save on gambling taxes?
Residency changes must be genuine. You need to actually live in NJ, not just claim it. NJ's domicile test includes home location, family ties, time spent, voter registration, and driver's license. But for legitimate relocations, the tax savings can be substantial.
Does the OBBBA 90% cap affect my state return?
It depends on your state's conformity. NJ: no (100% netting preserved). States with rolling IRC conformity: likely yes. No-loss-deduction states: irrelevant (already worse). Check with a CPA in your state.
Where can I get help with multi-state gambling taxes?
I'm a NJ-licensed CPA who specializes in gambling taxation across multiple states - NJ netting, the OBBBA 90% cap, multi-platform reconciliation, and nonresident filing. Schedule a free consultation.
Want to Make Sure You're Taking Advantage of NJ's Netting Rule?
NJ's 100% netting advantage is the most valuable gambling tax benefit of any state with an income tax. But most NJ residents - and many CPAs - don't apply it correctly, especially when the federal 90% cap creates a different number for the federal return. I'm Greg Monaco, a NJ-licensed CPA (License #20CC04711400). Every return is prepared personally.
Schedule a free 15-minute consultation →
Related Articles
Related reading: NJ Sportsbook Platform Guide | The 90% Gambling Loss Cap | Session Method Guide | Casino Comps & Loyalty Points | Sports Betting Promotions | Professional Gambler Status | IRS Detection Methods | Fantasy Sports DFS Guide | Married Couples Guide
Circular 230 Disclosure: This content is for informational purposes only and does not constitute tax advice. Written tax advice from a Circular 230 practitioner is governed by 31 C.F.R. §10.37; Treasury’s 2014 final regulations eliminated the former “covered opinion” rules, so the legacy “not intended or written to be used to avoid penalties” legend is no longer required. Tax laws change frequently; consult a licensed CPA about your specific facts.
