Do I owe Pennsylvania state tax on sports betting and gambling winnings?
By the W2gMatch team · Sources checked 09-06-2026 · General information, not tax advice.
Yes. Pennsylvania taxes gambling and lottery winnings as their own class of income at the flat 3.07% personal income tax rate, including Pennsylvania Lottery cash prizes since 2016. Losses are handled by subtracting the cost of wagers from winnings on Schedule T, never below zero and never against other income. Nonresidents owe Pennsylvania tax on Pennsylvania-source winnings.
How Pennsylvania taxes the winnings
Gambling and lottery winnings are “a separate class of income under Pennsylvania personal income tax law,” one of the eight classes the tax is imposed on. [1] The rate is the flat 3.07% that applies to every class. [2] Since Act 84 of 2016, cash prizes of the Pennsylvania Lottery paid on or after January 1, 2016 are included; noncash Pennsylvania Lottery prizes remain exempt. [1] [2]
Pennsylvania was the largest commercial gaming market in the country in 2025, at $2.85 billion. [3]
Losses on the Pennsylvania return
Pennsylvania does not use the federal itemized deduction. Instead, “gambling and lottery winnings income may be determined by taking total winnings and subtracting the total costs of wagers,” and the cost of wagers during the year, including lottery tickets, bingo cards, raffle tickets and slot card allotments, may be deducted from winnings received in the same year. [1] The result is reported on PA-40 Schedule T. [1]
Two limits: the class cannot go below zero, and a net loss cannot offset any other class of income or carry to another year. [1] Federal itemizing is irrelevant and the federal 90% limit does not apply; a Pennsylvania player who breaks even reports zero for the class.
What is withheld at the window
The Pennsylvania Lottery withholds 3.07% on prizes greater than $5,000 claimed after July 12, 2016. [2] Any payer required to file a federal W-2G for winnings from Pennsylvania sources must also file a copy with the Department by March 1, or March 31 electronically. [1] Casino and sportsbook payouts carry federal withholding at the federal thresholds.
Residents, part-year residents and visitors
Residents are taxed on gambling winnings from everywhere. “Pennsylvania taxes nonresident individuals, estates or trusts on gambling and lottery winnings derived from sources within Pennsylvania, other than noncash prizes of the Pennsylvania State Lottery.” [1] A visitor who wins at a Pennsylvania casino or on a Pennsylvania-licensed app files PA-40 as a nonresident for that class.
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 Pennsylvania compares.
Related questions
Can I deduct gambling losses in Pennsylvania if I do not itemize federally?
Yes. Pennsylvania subtracts the cost of wagers from winnings within the gambling class on Schedule T, independent of the federal return, but never below zero.
Are Pennsylvania Lottery prizes taxed by Pennsylvania?
Cash prizes paid on or after January 1, 2016 are taxed at 3.07%. Noncash prizes are exempt.
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Sources
- Pennsylvania Department of Revenue, PA Personal Income Tax Guide: Gambling and Lottery Winnings, read September 6, 2026
- Pennsylvania Department of Revenue, Lottery Winnings (Act 84 of 2016, 3.07%), read September 6, 2026
- American Gaming Association, State of the States 2026, 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.