Nine states take nothing from a Powerball ticket bought there. Two of them — California and Pennsylvania — do it with a targeted exemption despite levying an income tax. The rest simply have no income tax to apply.
The list
| Jurisdiction | Why it is zero | Take-home on today's jackpot |
|---|---|---|
| California | Exempts its own lottery prizes | $178,899,944 |
| Florida | No personal income tax | $178,899,944 |
| New Hampshire | No personal income tax | $178,899,944 |
| Pennsylvania | Exempts its own lottery prizes | $178,899,944 |
| South Dakota | No personal income tax | $178,899,944 |
| Tennessee | No personal income tax | $178,899,944 |
| Texas | No personal income tax | $178,899,944 |
| Washington | No personal income tax | $178,899,944 |
| Wyoming | No personal income tax | $178,899,944 |
Puerto Rico and the U.S. Virgin Islands also participate in Powerball and do not apply a state-level tax to their own lottery prizes; they are territories rather than states and their federal treatment differs, so they are excluded from the state pages.
The two exemptions are narrow
California's exemption applies to the California Lottery. Buy a Powerball ticket in Arizona and California will tax the winnings at up to 13.3%. Pennsylvania works the same way: the exemption is attached to the Pennsylvania Lottery prize, not to the person holding it.
This is why "move to California to avoid lottery tax" is bad advice. If you already live there and buy there, you win. If you move there after winning, the state where you bought the ticket has already taxed you, and your new state may also claim residency for the year of the win.
Delaware is not on the list, and people think it is
Delaware withholds nothing when it pays a prize, which is why some tables list it as tax-free. It is not. Delaware taxes lottery winnings as ordinary income up to 6.6% when you file, and it has no local income tax to complicate it. The absence of withholding is a cash-flow detail, not an exemption.
What the difference is worth
Compare the two ends of the table on today's $674M jackpot. A no-tax state leaves about $178.9M from the cash option. New York leaves about $148M. In New York City, with the 3.876% city rate, it drops to roughly $137M.
That spread is real, but it is a residency fact, not a shopping decision. States audit large prizes and residency is documented by where you live, vote, register cars and spend your days.
Questions
Do I pay no tax at all if I win in one of these states?
You still pay federal tax: 24% withheld, 37% owed. You only avoid the state layer. On today's jackpot that is still tens of millions of dollars to the IRS.
If I live in New York but buy in Florida, do I pay New York tax?
Yes. New York taxes residents on their income wherever it arises, and gives a credit for tax paid to Florida — which is zero, so the full New York rate applies. Buying in a no-tax state works only if you are actually a resident there.
Does California really tax nothing?
California taxes nothing on a California Lottery prize, despite a 13.3% top rate. It does tax winnings from other states' lotteries, so the exemption follows the ticket, not the person.
What about Delaware and New Hampshire?
New Hampshire has no income tax on wages or lottery prizes. Delaware does tax lottery winnings at up to 6.6% — it simply does not withhold at payout, which makes it look tax-free on the claim form. It is not.