WOYALE.
Your federal return is only half of the picture. Most states with an income tax also tax gambling winnings, and they disagree on the details: whether you can deduct losses, whether they tax people who live elsewhere, and whether anyone withholds tax at payout. Three questions sort it out. Does your home state tax winnings? Can you offset them with losses? Did you win in another state?
This page is general information, not tax advice. State rules change each year, so check your state’s revenue department or ask a CPA before you file. For the federal rules, start with Crypto gambling winnings.
States with no personal income tax
A handful of states do not tax wages or gambling winnings at the state level. Nevada’s Department of Taxation says the state imposes no income tax on individuals. Tennessee repealed its Hall tax on interest and dividends for periods beginning January 1, 2021, so it has no individual income tax left. Texas has none either, and its constitution bars one. Each state’s page on Woyale, such as Texas or Nevada, has a one-line tax note.
Two cautions. First, federal tax still applies in full. Second, living in one of these states does not protect winnings earned in another state that taxes non-residents (see below).
States that tax winnings
If your state has an income tax, assume winnings are taxable. Many states start from your federal adjusted gross income, so the winnings already sit in the number they tax. Where the states split is on losses.
| State | Losses against winnings | Source |
|---|---|---|
| Illinois | No deduction for gambling losses | Illinois Dept. of Revenue |
| Pennsylvania | Cost of wagers can be subtracted from winnings of the same year. Winnings are their own income class, so a net loss cannot reduce other income. | PA Dept. of Revenue |
| New Jersey | Losses offset winnings of the same year. You cannot report a negative figure. | NJ Division of Taxation |
| New York | Follows the federal approach: report the full winnings, claim losses as an itemized deduction, capped at winnings | NY Dept. of Taxation |
| Wisconsin | Session method. Net gains from winning sessions are taxed. Net losses from losing sessions are not deductible. | WI Dept. of Revenue |
This is a sample, not a full list. A state that follows the federal itemized rules inherits the federal limits too, including the 90% cap that began in 2026. See Deducting gambling losses. A state that gives you nothing for losses, like Illinois, taxes you on winnings even when you broke even.
Non-residents: the state where you bet
A state can tax winnings earned inside its borders by someone who lives elsewhere. The question is where the bet was placed, not where you live.
- Illinois taxes money won in Illinois, sports bets included, whether or not you live there. The rule has applied since tax year 2019.
- Pennsylvania taxes non-residents on winnings from wagers placed in Pennsylvania, and does not tax winnings from wagers placed outside the state.
- New York counts gambling winnings above $5,000 from wagering transactions in New York as New York source income for non-residents.
- New Jersey taxes non-residents on winnings from New Jersey bets. A non-resident filer can only offset those winnings with losses incurred in New Jersey.
- Wisconsin taxes a non-resident only on winning sessions from Wisconsin sources.
For a licensed sportsbook, that usually means where you were standing when you placed the bet, since licensed apps check your location. Keep a record of the state for every bet. Your home state may give a credit for tax paid to another state, but the rules vary. Illinois, for example, lets residents claim the credit only for winnings from outside Illinois.
Withholding at payout
Some payers withhold state tax before you see the money, mostly on lottery and casino-style prizes. Wisconsin, for example, withholds 7.65% from Wisconsin Lottery prizes of $2,000 or more. Whether a sportsbook must withhold depends on the state. Federal withholding, covered on the winnings page, is separate and has its own thresholds.
Withholding is a prepayment, not the final bill. Your return settles up the difference. An unlicensed offshore operator withholds nothing and files no forms, and you still owe the tax. See Are offshore sportsbooks legal?.
How crypto fits in
State returns generally build on your federal figures, so the same dollar number carries over. That number is the fair market value of the crypto at the moment you received it. A later sale or swap is a separate event with its own gain or loss, handled on your federal return and then, in most states, on your state return.
In practice:
- Record the dollar value when the payout arrives, plus the state where the bet was placed.
- Keep the exchange or explorer price you used. See Records to keep.
- Do not net wins and losses before reporting. States that allow a loss deduction usually want the full winnings shown first.
Worked example
You live in Illinois. In 2026 you win 0.5 ETH on a bet you placed from home. ETH is $3,000 at that moment, so the winnings are $1,500. Later in the year you lose $1,500 on other bets. You end the year even.
| Illinois resident | New Jersey resident | |
|---|---|---|
| Winnings | $1,500 | $1,500 |
| Loss allowed on the state return | $0 | $1,500 |
| State taxable amount | $1,500 | $0 |
| State tax at 4.95% (Illinois flat rate) | $74.25 | $0 |
The Illinois figure is a flat 4.95% on $1,500. New Jersey’s graduated rates are not needed here because its taxable amount is zero. On the federal side, a filer who itemizes can deduct only 90% of the $1,500 loss, which leaves $150 of federal taxable income, or $36 of tax at 24%. A filer who takes the standard deduction can deduct nothing.
The same bets produce different state bills. If you also sell the ETH for more than $3,000, the gain is a separate item.
When to ask a professional
Get advice if you won in more than one state, moved during the year, bet for a living, won large amounts, or have crypto payouts you sold at different prices. Residency and sourcing rules are fact-specific, and mistakes are costly.
Common questions
Do I owe tax to the state where I won if I live somewhere else?
Often yes, if that state taxes non-residents on winnings earned there. Illinois, Pennsylvania, New York, New Jersey and Wisconsin all do in some form. Your home state may offer a credit, depending on its rules.
If my state has no income tax, do I owe anything?
No state income tax, but you still owe federal tax. You may also owe another state’s tax if you won there.
Are crypto winnings taxed differently by states?
Not in kind. The state generally uses the same dollar value as your federal return, measured when you received the coins. A later sale is a separate gain or loss.