Gambling winnings tax in Arizona

Arizona allows gambling losses only as an itemized deduction on the state return, whether or not you itemize federally. Take its standard deduction and it taxes your gross winnings. Whether only 90 percent of your losses count from 2026 is not settled.

Checked against Arizona’s own sources on 2026-09-12.

In short

Arizona taxes all the gambling income in your federal adjusted gross income. It has no subtraction for lottery, gambling, wagering or prize income.10
If you itemize for Arizona, the Schedule A (140) instructions say you must still complete a federal Schedule A, even if you do not itemize on your federal return.5

How Arizona treats gambling losses

5, 6, 7, 10

Arizona does not tie the deduction to your federal itemizing choice. You can itemize on the Arizona return even if you take the federal standard deduction, but the losses count only if you do, in place of Arizona's standard deduction.

The two examples below are the same numbers the calculator uses, worked at Arizona rates.

Two examples, worked at 2026 Arizona rates

A single filer with $60,000 of other income who takes the standard deduction on everything except gambling losses.

A losing year

You win $50,000 and lose $52,000, so you finish down $2,000.

Federal: $3,596
Arizona: $483
Total: $4,079

You finished the year down and still owe tax.

Federally you itemize, so your losses offset your winnings, but the 2026 rule caps that deduction at 90 percent and leaves $3,200 taxable. Arizona lets you deduct gambling losses as an itemized deduction on the state return, whether or not you itemize federally. Your Arizona income, after the larger of the standard deduction and your itemized deductions, goes from $43,900 without the win to $63,200 with it. The extra $19,300 is taxed at 2.5 percent, which comes to $483.

A winning year

You win $50,000 and lose $10,000, so you finish up $40,000.

Federal: $10,350
Arizona: $1,250
Total: $11,600

Federally you take the $16,100 standard deduction, which is worth more than itemizing, so your gambling losses do not reduce your federal tax at all. Arizona lets you deduct gambling losses as an itemized deduction on the state return, whether or not you itemize federally. Your Arizona income, after the larger of the standard deduction and your itemized deductions, goes from $43,900 without the win to $93,900 with it. The extra $50,000 is taxed at 2.5 percent, which comes to $1,250.

Arizona income tax rates, 2026

4, 5, 7

Taxable income	Rate
$0 and above	2.5 percent

The calculator also applies what this table leaves out: the federal overall limit on itemized deductions at the top federal bracket, taken before the table.

Withholding on winnings

Arizona withholds 2.5 percent. The payout that triggers it depends on the wager, and the lowest trigger is $5,000. The rules in the state's sources:

the state lottery: above $5,000, measured after the stake comes off (Arizona states no figure of its own and withholds where federal withholding applies).
pari-mutuel wagering and sports wagering: above $5,000, and only where the payout is at least 300 times the stake, measured after the stake comes off (from horse and dog racing permittees, event wagering operators and fantasy sports contest operators, where federal withholding applies).
slot machines, keno and bingo, other lotteries, sweepstakes and wagering pools, poker tournaments and other wagers: nothing is withheld. Arizona’s withholding law names only the Arizona Lottery, racing permittees, fantasy sports contest operators and event wagering operators, so a casino is not among them.

A.R.S. 43-405 also reaches federal withholding under section 1441 on a winner who is a foreign person, which has no dollar floor.

Withholding is a credit against the bill, not the bill itself. It does not settle what you owe.

The federal 90 percent loss limit in Arizona

6, 7, 8, 12

From tax year 2026 the federal deduction for gambling losses is cut to 90 percent of what you lost, and never more than what you won. Public Law 119-21 did it, at section 70114(a), by rewriting 26 U.S.C. 165(d).

Arizona has not said whether the federal 90 percent limit applies. Its own law measures the state deduction by the federal figure, so the limit can arrive without Arizona doing anything. Arizona follows the federal code as it stood on 2026-01-01.

Our estimate assumes the limit applies, which gives the higher tax. The calculator also shows the tax if the limit does not apply. We would rather tell you the number could be lower than let you plan around one that turns out to be too low.

If you do not live in Arizona

4, 9

A.R.S. 43-1011(A) taxes a nonresident on taxable income derived from sources within Arizona at the same 2.5 percent rate. A.R.S. 43-405 makes the state lottery commission, horse and dog racing permittees, fantasy sports contest operators and event wagering operators withhold on prize payments to an individual without regard to where that individual lives.

The calculator works the bill for somebody who lives in Arizona. It does not apportion income between states, so a nonresident return is not what the figure above describes.

More about Arizona

Gambling income Arizona taxes

Arizona has no subtraction for lottery, gambling, wagering or prize income, so it taxes all the gambling income in your federal adjusted gross income.10

If you itemize

If you itemize for Arizona, the Schedule A (140) instructions say you must still complete a federal Schedule A, even if you do not itemize on your federal return.5

A 2026 Arizona law limits your Arizona itemized deduction for state and local taxes to $10,000 (A.R.S. 43-1042(D)). This replaces the federal limit.6, 7

From 2026 Arizona also applies the federal overall limit on itemized deductions (IRC 68). No source says whether the limit is worked out before or after the $10,000 limit on the state and local tax deduction, or on federal or Arizona figures. No 2026 Form 140 Schedule A is published yet.

The standard deduction

Arizona’s standard deduction is set by filing status:3

Filing status	Standard deduction
Single or married filing separately	$15,750
Head of household	$23,625
Married filing jointly	$31,500

These equal the federal amounts for 2025, and the law changes them each year the way the federal basic standard deduction changes. Arizona has not published 2026 figures.

About this estimate

If you are 65 or older, the calculator takes off Arizona’s $2,100 exemption, and $2,100 more for a spouse 65 or older on a joint return.

Because Arizona has not published 2026 standard deduction figures, the calculator uses the federal standard deduction for the year you choose.

The calculator applies the federal overall limit on itemized deductions even if you take the federal standard deduction and itemize for Arizona.

Sources

Every figure above traces to a primary source: a statute, an administrative code, a state agency page, or official form instructions.

1. A.R.S. 43-1023(E): an exemption of $2,100 for a taxpayer 65 or older, and for a spouse 65 or older on a joint return (checked 2026-10-12)
2. A.R.S. 43-1072: a property tax credit at 65 or older, up to $502, for income from all sources under $3,751 alone or $5,501 for a household (checked 2026-10-12)
3. A.R.S. 43-1041(A), Arizona standard deduction, adjusted for inflation under subsection H (checked 2026-09-25)
4. A.R.S. 43-1011 Version 1 (Laws 2021, Ch. 412, sec. 15), taxes and tax rates, subsection A paragraph 9 (checked 2026-09-12)
5. Arizona 2025 Form 140 resident booklet, line 43 itemized deductions, line 46 tax at 2.5 percent, and the Form 140 Schedule A instructions (checked 2026-09-12)
6. A.R.S. 43-1042, itemized deductions (checked 2026-09-12)
7. S.B. 1861 as introduced, 57th Legislature 2nd Regular Session, Sec. 12 amending A.R.S. 43-105 and Sec. 17 amending A.R.S. 43-1042. The current statute pages carry the enacted text (checked 2026-09-12)
8. A.R.S. 43-105(A), internal revenue code in effect on January 1, 2026, for taxable years beginning after December 31, 2025 (checked 2026-10-11)
9. A.R.S. 43-405, extension of withholding to gambling winnings (checked 2026-10-11)
10. A.R.S. 43-1022, subtractions from Arizona gross income, including (35), from 2025, the amount deducted for a qualified individual under IRC 151(d)(5)(C) (checked 2026-10-10)
11. A.R.S. 43-1042(A): itemized deductions "subject to the limits prescribed by sections 67, 68 and 274 of the internal revenue code" (checked 2026-10-01)

The federal rule, for the parts of this page that rest on it

12. Public Law 119-21 section 70114(a), which rewrote 26 U.S.C. 165(d) on wagering losses from tax year 2026 and sets out its text (checked 2026-10-18)

We could not confirm these from an official source: whether any city or county tax applies.