For the past few years, Maryland bettors have been able to play various casino games at the state’s six commercial casinos, plus wager at Video Lottery Terminals (VLTs) and play other games through the Maryland Lottery. Soon, Maryland sports betting will become a reality as well, and with that will come plenty of new bettors.
One thing all bettors should know: Income gained from Maryland online gambling or in person gambling, regardless of how or where you win, is subject to state and federal taxes. At MarylandBets.com we help you navigate the process of calculating how your gambling winnings will be taxed and what you need to know about the process. Tax issues can be complex, so it’s advisable to consult a tax professional or financial advisor for further information and to avoid mistakes that could result in penalties.
Tax rates depend on your annual income and tax bracket. Gambling income is subject to state and federal taxes but not FICA taxes, and the rate will depend on your total taxable income (not just wages) minus deductions (standard or itemized) in Maryland.
Marginal tax rate is the bracket your income falls into. Effective tax rate is the actual percentage you pay after standard deductions, etc., and operate on a sliding scale depending on filing status and total taxable income. The state tax rate in Maryland is between 2% and 5.75%.
When gambling winnings are combined with your annual income, you could move into a higher tax bracket, so be aware of gambling income (and factor it into your state income tax) before you start your Maryland tax preparation.
Yes, all gambling winnings are taxable in Maryland. That applies to winnings from casinos, lottery, horse racing betting and sports betting. Winnings above a certain level will automatically trigger notification to the IRS and a W-2G Form, which you should receive from the operator come tax time (the IRS gets a copy of it, too). Often, federal taxes are automatically withheld right when you receive your gambling payout if your winnings cross a designated threshold.
However, if no tax was withheld and you did not receive a W-2G IRS Form, you still must report all gambling income on your federal and state income tax return, according to the IRS.
There is a standard 24% federal withholding tax on gambling winnings. That’s automatically deducted from winnings that exceed a specific threshold, though that is an estimated tax. The actual amount you will owe in tax liability will depend on your tax bracket and could be lower or higher.
Maryland levies between 2% and 5.75% in state taxes, including gambling winnings. Here is a breakdown of how the Maryland state tax structure works for someone filing single:
|Taxable Net Income||Tax Rate|
|Up to $1,000||2%|
|$1,000-$2,000||$20 plus 3% of everything over $1,000|
|$2,000-$3,000||$50 plus 4% of everything over $2,000|
|$3,000-$100,000||$90 plus 4.75% of everything over $3,000|
|$100,000-$125,000||$4,697.50 plus 5% of everything over $100,000|
|$125,000-$150,000||$5,947.50 plus 5.25% of everything over $125,000|
|$150,000-$250,000||$7,260 plus 5.50% of everything over $150,000|
|$250,000 and up||$12,760 plus 5.75% of everything over $250,000|
Depending on how much a bettor wins, he or she might receive a W-2G Form from the gaming facility (casino, pari-mutuel operator, sportsbook, online casinos MD, online sportsbook, etc). This IRS form reveals the amount of winnings and if any tax was withheld. A copy of that W-2G is sent to the Internal Revenue Service.
Expect to receive a W-2G form if your gambling winnings exceeded any of these thresholds the previous calendar year:
Casinos are not required to issue a W-2G for winnings for table games (blackjack, roulette, craps, etc.), though the IRS expects players to track their wins and losses. If you win non-cash prizes, such as an automobile or a vacation, the IRS instructs you to report the fair market value of each prize.
You will not receive Form W-2G if your gambling winnings did not meet the automatic withholding threshold. However, all gambling winnings are considered taxable income to the IRS. So, how do you calculate wins and losses from the previous year without a W-2G?
We recommend that you keep accurate records of your wagering activity. The IRS requires all bettors to do this. Players should retain and keep handy all relevant betting records and receipts.
One advantage to gambling online is that the mobile betting operator(s) can provide an electronic record of all your wagers made during the previous year, making it easy to track profits and losses.
Yes, but only if you itemize deductions on your federal income tax return. That’s not good news for most filers – after the 2017 Tax Cuts and Job Act passed, an estimated 90% use the standard deduction for their tax return and cannot deduct gambling losses.
For those who itemize on their federal income tax return, only the amount matching any wagering winnings can be deducted. So, if you won $3,000, but lost $5,000 on wagers the previous year, only $3,000 can be deducted. You cannot carry over the remaining $2,000.
The IRS could also ask you to substantiate wins and losses. If that happens, you should keep the following documentation to present to the IRS:
Deductions and expenses are different for those gamblers considered professionals. A professional gambler is defined as someone who gambles as part of a trade or business and treated by the IRS as self-employed individuals. The vast majority of bettors will fit the recreational gambler category.
For Maryland Lottery winnings of less than $5,000 but more than $500, state residents must file a Maryland Payment Voucher Form and pay those taxes within 60 days of claiming the prize. For prizes of more than $5,000, the Lottery will deduct 24% in federal tax and 8.95% in state tax for Maryland residents (8% state tax for non-residents). You must also still report your winnings as income, according to the MDLottery.com website.
You will incur penalties and interest payments on those unreported winnings. If you have a statement of winnings on Form W-2G, the Internal Revenue Service also has a copy. If you do not report those winnings, the IRS could tell you to report them, or add interest and penalties to your tax bill.