Do I owe California state tax on sports betting and gambling winnings?
By the W2gMatch team · Sources checked 09-06-2026 · General information, not tax advice.
Yes. California taxes all gambling winnings as ordinary income at its graduated rates, from 1% to 12.3% plus a 1% surcharge above $1 million, except prizes from the California Lottery, which it does not tax. Losses are an itemized deduction up to winnings, and because California has not adopted the 2025 federal act, the 90% limit does not apply on the state return.
How California taxes the winnings
The Franchise Tax Board says all gambling winnings are taxable, listing lotteries, raffles, horse races and casinos, and that the income is included in federal adjusted gross income, which is where the California return starts. [1] The one exception is the state's own lottery: “We do not tax winnings from the California Lottery, including SuperLotto, Powerball, and Mega Millions.” [1]
The rate is California's ordinary schedule, nine brackets from 1% to 12.3% with an additional 1% on taxable income over $1 million. [2] A large win can push a year into a higher bracket by itself.
The state and federal figures diverge because California's conformity date predates the 2025 act.
Losses on the California return
“Generally, you cannot deduct gambling losses that are more than your winnings,” the FTB says, with the example that a player who won $10,000 and lost $15,000 may deduct $10,000, as an itemized deduction on the California return. [1]
California conforms to the Internal Revenue Code only as of a fixed date. S.B. 711 moved that date to January 1, 2025, and expressly did not incorporate the One Big Beautiful Bill Act, [3] so the federal 90% limit on losses for tax years from 2026 is not part of California law unless the legislature adopts it. A California itemizer who wins $100,000 and loses $100,000 in 2026 deducts $90,000 federally and $100,000 on the state return. That is a difference to watch on Schedule CA.
What is withheld at the window
California does not impose its own withholding on casino or sportsbook payouts to residents; federal withholding applies at the federal thresholds. [5] A W-2G from a California cardroom or tribal casino therefore shows federal withholding only.
Residents, part-year residents and visitors
Residents are taxed on winnings from everywhere, including Nevada trips, with no Nevada tax to credit. A nonresident who wins at a California cardroom, tribal casino or racetrack has California-source income and files Form 540NR, using Schedule CA (540NR) to show the California portion. [4]
What is legal in California, and who sends the forms
Sports betting is not legal in California; voters rejected both 2022 propositions and no measure has qualified for 2026. [6] What is legal, and what sends forms, is tribal casino play, cardrooms, horse racing and the lottery. Daily fantasy contests have been declared illegal by the Attorney General, and dual-currency sweepstakes sites were banned from January 1, 2026. [6] Winnings from an out-of-state or offshore book are still taxable to a California resident.
The federal return underneath
Federal: for tax years beginning in 2026, only 90% of gambling losses are deductible (the 90% gambling loss cap).
Every state page sits on the same federal rules: all winnings are reported on Schedule 1 whether or not a form arrives, and losses are an itemized deduction capped at winnings and, from 2026, at 90% of losses under amended section 165(d). The federal loss page and the by-state table show how California compares.
Related questions
Are California Lottery prizes taxed by California?
No. The FTB does not tax California Lottery prizes, including SuperLotto, Powerball and Mega Millions. They are still federal income.
Does the federal 90% loss limit apply on my California return?
Not as of the current conformity date. California conforms to the Internal Revenue Code as of January 1, 2025, and S.B. 711 did not adopt the One Big Beautiful Bill Act.
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See the federal side of the same numbers
The calculator shows the federal taxable figure and the phantom income the 90% limit creates. California's tax applies on top.
Sources
- California Franchise Tax Board, Gambling (personal income types), last updated December 31, 2025
- Grant Thornton, California conformity date update excludes OBBBA (S.B. 711), October 21, 2025 (secondary source)
- Grant Thornton, California conformity date update excludes OBBBA (S.B. 711), October 21, 2025 (secondary source)
- California Franchise Tax Board, 2025 Instructions for Schedule CA (540NR), tax year 2025
- IRS Instructions for Forms W-2G and 5754, Rev. January 2026
- Legal Sports Report, California sports betting: guide to CA legislation, 2026 (secondary source)
Related
This page is general information about how U.S. federal and state tax rules apply to gambling, written to be checked against the sources it cites. It is not tax advice for your situation. A licensed CPA or enrolled agent should review your return before it is filed.