State Tax Conformity: Does Your State Follow The Federal 90% Rule?

A critical question that most coverage of the new rule fails to address is whether state income taxes follow the federal 90% limitation or apply their own rules. State tax conformity with federal law is not automatic. Each state individually decides whether to adopt federal tax code changes. For the 90% gambling loss deduction cap, most states that allow gambling loss deductions have not yet formally addressed whether they will conform to the new federal limitation. This creates a complex multi-state situation for many gamblers.

Nevada, the state with the highest per-capita gambling activity, has no state income tax, so the question of conformity does not arise for Nevada residents. Florida similarly has no state income tax.

States like California, New York, and Texas that do have state income taxes but no state-level gambling loss deduction apply their own rules entirely- in these states, gambling losses have never been deductible at the state level regardless of the federal treatment.

States like Massachusetts and New Jersey that have their own specific limitations on gambling loss deductions may apply those state-specific rules independent of the federal change. In Massachusetts, for example, casual gamblers face restrictions on deducting losses that are separate from the federal framework.

States that do conform their income tax code to federal law may automatically adopt the 90% limitation, but this depends on whether the state's conformity is static (conforming to the tax code as of a specific date) or rolling (automatically adopting federal changes). Players in states with income taxes should check with a state tax professional or their state's department of revenue for current guidance on how the 90% rule is being treated at the state level. This is not a settled area of law in most states as of May 2026.