California does not tax California Lottery winnings. For 2025, that includes prizes from SuperLotto Plus, Powerball and Mega Millions when the ticket was purchased through the California Lottery. Federal income tax still applies, and California generally taxes lottery winnings from other states.
California Lottery Winnings: Tax Overview
| Type of winnings | California state income tax | Federal income tax |
|---|---|---|
| California Lottery prize | No | Yes |
| California Powerball or Mega Millions prize | No | Yes |
| Lottery prize from another state | Generally yes for California taxpayers | Yes |
| Casino, raffle or sports-betting winnings | Generally yes | Yes |
California's Franchise Tax Board excludes qualifying California Lottery winnings from California taxable income. You first include the winnings in your federal adjusted gross income. Then you remove the qualifying amount on the California return using Schedule CA.
Do You Pay Federal Tax on California Lottery Winnings?
Yes. Federal income tax applies to California Lottery winnings. The IRS treats lottery prizes as taxable gambling income. This includes cash prizes and the fair market value of noncash prizes, such as cars or homes.
You must report the winnings on your federal tax return even if you do not receive Form W-2G.
Certain lottery prizes are subject to 24% federal withholding. For lottery winnings, withholding generally applies when the prize exceeds $5,000 after the wager is subtracted and the applicable federal threshold is met. Withholding is an upfront payment, not necessarily your final tax bill. Your final federal liability depends on your total income, filing status and tax bracket.
Does California Withhold State Tax From Lottery Prizes?
No California state income tax is withheld from California Lottery prizes. The California Lottery says it does not withhold state or local taxes from its prizes. Federal withholding may still apply to qualifying winnings.
Are Out-of-State Lottery Winnings Taxable in California?
Yes. California generally taxes lottery winnings from other states. A California taxpayer who wins a lottery prize issued by another state usually must include that prize in California taxable income.
California's 2025 Schedule CA instructions exclude California Lottery winnings but do not provide the same exclusion for lottery winnings from other states.
If another state taxes the same prize, a California resident may qualify for a credit for income tax paid to that state. California's credit rules apply, and the calculation can be complicated for a large prize.
How Do You Report California Lottery Winnings?
You generally report the prize in two stages:
- Federal return: Report the full prize as gambling income on Form 1040. Report any federal withholding shown on Form W-2G.
- California return: Include the winnings in the federal income amount, then subtract qualifying California Lottery winnings on Schedule CA.
This removes qualifying California Lottery winnings from California taxable income.
Gambling losses may be deductible on your federal return if you itemize deductions. The deduction cannot exceed your gambling winnings. Keep the winning ticket, payment records and documentation for any losses you claim.
Bottom Line
California does not tax California Lottery prizes, including California Powerball, Mega Millions and SuperLotto Plus winnings. You still owe federal income tax, and California may tax lottery winnings from another state.
For a major jackpot, get tax advice before choosing a lump-sum payment or annuity. Federal tax, residency and multi-state issues can change the amount you keep.