California lottery tax in 2026: the exemption and its limits
California is the large exception: its own lottery prizes are free of state income tax, for residents and visitors alike. The October 20, 2026 Mega Millions example shows where that stops.
- California tax on a California Lottery prize
- none
- Top California rate on other prizes
- 13.3 %
- Credit form
- Schedule S
- No credit for tax paid to
- Arizona, Oregon, Virginia
State and local tax, ticket bought in Arizona
$22,626,533
Bought at home in California: $0. Difference: $22,626,533.
| Prize this year | $170,300,000 |
| Federal income tax (top rate reached 37 %) | $62,978,180 |
| Arizona tax as a nonresident | none |
| California tax | $22,626,533 |
| Withheld when the prize is paid | $40,872,000 |
| Still to pay with the return | $44,732,713 |
| After all taxes | $84,695,287 |
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
California does not tax winnings from the California Lottery, including Powerball and Mega Millions tickets sold in the state, and the exclusion is not limited to residents. A single Californian who takes the $170.3 million cash value of the October 20, 2026 Mega Millions jackpot on a California ticket pays only federal tax, $62,978,180, and keeps $107,321,820. The same winner holding a ticket bought across the Colorado River in Arizona owes California $22,626,533, because prizes from other states' lotteries are ordinary California income taxed up to 13.3 %. California also refuses its Schedule S credit for tax paid to Arizona, Oregon, Virginia: those states credit California's tax on their own nonresident returns instead. Gambling losses are deductible only as an itemized deduction capped at winnings, and California Lottery losses are not deductible at all. A nonresident who wins on a California ticket owes California nothing.
A Californian with a ticket from another state
State and local tax, ticket bought in Oregon
$242,633
| Prize this year | $2,000,000 |
| Federal income tax (top rate reached 37 %) | $707,180 |
| Oregon tax as a nonresident | $0 |
| California tax | $242,633 |
Two rules on one return
The California Franchise Tax Board puts it in a single line of the Schedule CA instructions: California excludes California Lottery winnings from taxable income and makes no adjustment for lottery winnings from other states, because they are taxable by California (FTB, 2025 Schedule CA instructions). Its gambling page says the same in plain words and names Powerball and Mega Millions among the games covered (FTB, gambling income). So the question that decides a California return is not how large the prize is but where the winning ticket was sold.
The exemption is a subtraction. The prize still appears in federal adjusted gross income, which California starts from, and the winner removes it on Schedule CA. Federal tax is untouched by any of this: the California Lottery withholds 24 % for the IRS on a prize over $5,000, and the rest of the federal bill is settled with the 2026 return.
| Winner | Ticket sold in | California tax | Other state tax | Kept after all taxes |
|---|---|---|---|---|
| Single, Los Angeles | California | $0 | $0 | $107,321,820 |
| Single, Los Angeles | Arizona | $22,626,533 | $0 | $84,695,287 |
| Married couple, $140,000 of wages | California | $0 | $0 | $107,340,090 |
| Married couple, $140,000 of wages | Arizona | $22,614,225 | $0 | $84,725,864 |
Arizona, Oregon and Virginia: the reverse credit
Most states give their residents a credit for income tax paid to another state, and California does too, on Schedule S. The list of states it credits leaves out Arizona, Oregon, Virginia. The FTB explains why: those states allow California residents a credit for the California tax on their own nonresident returns, so California does not credit them in turn (FTB, 2025 Schedule S instructions). In practice a Californian with an Oregon ticket files an Oregon nonresident return, takes Oregon's credit for the California tax there, and pays California in full.
The Oregon example on a $2,000,000 prize shows the mechanics. Oregon taxes nonresidents on its lottery prizes over $600 and withholds 8 % at the claim, $160,000 here. California's tax on the prize is $242,633; once Oregon credits it, the Oregon tax left is $0, and the money Oregon withheld comes back through the Oregon return. The same prize on a California ticket would have cost no state tax at all. The cost of crossing the line is the whole California tax, $242,633.
Arizona sits on the same list, but its own rule for nonresident lottery winners is less clear: the Arizona statute and the nonresident return instructions read for this site tax "Arizona source" income without naming lottery prizes, so no Arizona figure appears in the calculation. Arizona does withhold 2.5 % on prizes over $5,000. Arizona lottery tax covers that side.
Nevada buyers and other visitors
Nevada sells no lottery tickets, so its residents who play cross into California. The FTB exclusion covers them as well: a Nevada resident who wins $2,000,000 on a California ticket owes California nothing and, with no Nevada income tax, keeps $1,292,820 after federal tax alone. An Arizona resident in the same position escapes California but not Arizona, which taxes its residents on prizes from other states: $50,000 on that prize. States without a lottery lists where the cross-border buyers come from.
Withholding: what the claim center keeps
Since no California tax is due on a California Lottery prize, nothing is withheld for the state; the only deduction at the claim is the federal one. The FTB pages read for this site do not print a lottery withholding rate, and the California Lottery claim pages could not be read, so this site states the absence of state withholding as a consequence of the exemption rather than as a published figure. On a ticket from another state, that state's lottery applies its own withholding, as the Oregon example shows; California then expects its full tax with the return or through estimated payments, since nobody withheld it.
Losses and smaller prizes
California lets a resident deduct gambling losses only as an itemized deduction and only up to the gambling winnings reported. Losses on California Lottery tickets are excluded, which mirrors the exclusion of the prizes: a scratcher habit cannot offset an Arizona Powerball prize. The FTB pages read for this site do not say whether California follows the federal rule that, from 2026, allows only 90 % of wagering losses; the federal loss rule explains it.
The out-of-state rule bites on modest prizes too. A $25,000 Oregon prize costs a single Californian $2,160 of California tax, with $2,000 withheld by Oregon until the Oregon return returns it.
After a move
Because California does not tax a nonresident on a California Lottery prize, annuity payments of such a prize are not taxed by California after the winner leaves. The reverse case matters more: a winner of an out-of-state jackpot who moves to California and keeps receiving installments brings them into California income in each year of residence. Moving after winning walks through the timing. These are estimates on stated assumptions, not tax advice; the FTB and the lottery that pays the prize have the last word, and confidential help with gambling is available at 1-800-MY-RESET.