A lot of people have questions about gambling taxes in Maryland now that sports betting is legal. We provide the answers here, and you will be fully informed when you absorb this information.
Yes, you have to pay taxes on winnings gambling winnings in Maryland. Gambling winnings are just like any other type of income.
If you turn a profit, you are pocketing taxable income, and you have to claim the income when you file your tax returns.
There is no particular rate that applies to gambling only in Maryland. You add your gambling winnings to the rest of the taxable income that you are claiming, and you pay the rate that applies to you.
You also have to address Maryland state income taxes on gambling winnings, and there is a graduated rate that starts at 2% and tops out at 5.75%.
Plus, there are local income taxes with rates that are set by each respective county. The lowest is 2.25% in Worcester County, and the highest is 3.2% in 11 different counties.
There is a section for “other income” on line 8 of Schedule 1 of Form 1040.
The answer is yes and no. There is no notification sent to the Internal Revenue Service when you win in relatively modest increments. However, if you take down a significant score, the payer will file Form W-2G to notify the IRS about the taxable event.
These are the win thresholds that trigger the issuance of the form:
Yes, income is income in the eyes of the IRS. If you want to follow the letter of the law, you have to report all gambling winnings, period.
This is another question with a multi-pronged answer. Maryland betting apps don’t withhold taxes unless you win more than $5,000. If you take down a win that exceeds the threshold, the establishment may be required to withhold up to 28% of your winnings.
On the state level, the $5,000 threshold is the same, and the rate of withholding is 8.75%.
Some people are confused about thresholds for gambling taxes in Maryland because there are thresholds that apply to Form W2-G issuance and proactive income tax withholding. There is no threshold when it comes to tax responsibility. All winnings are taxable income.
However, on the state level, if you win more than $500 and did not have Maryland tax withheld, you have to include Form 502D, Declaration of Estimated Tax when you file.
The state’s share of lottery proceeds supports the Maryland General Fund. Casino revenue goes to boost the communities where casinos are located, and a portion of it is used to support education.
A percentage goes to the horse racing industry, and contributions are made to minority and women-owned small businesses. Sports betting and daily fantasy revenue is utilized to bolster educational programs.
People sometimes search for a “Maryland gambling winnings tax calculator” or some other variation, like “MD gambling tax calculator.” They do this because they are under the impression that there is a separate gambling tax.
As we have explained, there is no gambling tax in Maryland – gambling winnings are simply taxable income, and there are income tax calculators out there. You can simply add gambling winnings to your other sources of income to get an estimate of your tax responsibilities.
The Maryland State Lottery & Gaming Control Agency reports that in 2022, gambling generated $1.511 billion in revenue for the state. This shatters the previous record that was set in 2021 by a significant $120 million.
There is no Maryland lottery tax. If you win the lottery, you have to claim the income on your state and local tax returns.
A Failure to Pay penalty will be imposed by the IRS. They add .05% to your debt for every month that you are delinquent, with a maximum of 25%.
You can, as long as the deduction is being used to offset gambling winning and you itemize deductions when you file your taxes.
The entity paying out the money will complete Form 5754 when they prepare the W-2G to notify the IRS that the payout will be distributed among members of a group. Each member of the group will be required to assume their portion of the tax liability.
Yes, out-of-state winnings are taxable in Maryland, but if you pay state taxes in another state at the time you win the money, the winning won’t be taxed twice.
Fact checked by: Gary Garry
