Maryland Sports Betting Tax Rate Calculations and Gambling Winnings Tax Forms

Sports betting and casino operators pay 15% on gross gaming revenue. Similarly, Maryland sports bettors pay tax on gambling wins. This applies to residents and those visiting from outside of the state.

When it comes to tax on gambling winnings in Maryland, there are four important points to remember:

1. Gambling winnings are liable for state and federal tax
2. Operators withhold tax when wins go over certain thresholds
3. Maryland bettors are given a W-2G form when wins go over certain thresholds
4. You are responsible for reporting and paying taxes due on gambling winnings

Federal tax on gambling winnings is 24%. Maryland state tax on gambling winnings ranges from 2% to 5.75% based on your net income (i.e. your tax rate). You can skip to the next section to see the amount of state tax you'll pay in Maryland based on your income.

Maryland Taxable Gambling Winnings and their Tax Rate

Maryland then has five more levels that vary depending on how you file:

If you are married and file jointly, file as head of household, or are a widow/widower in certain circumstances, this is your tax schedule:

What is the Maryland Sports Betting Tax Rate? 

The Maryland sports betting tax rate is 15% for operators. For sports bettors in MD, winnings are liable for 24% federal tax and up to 5.75% state income tax.

Maryland Lottery Taxes

As per MD tax laws, 8.95% is withheld from lottery wins over $5,000 if you're a resident and 8% if you're not. Additionally, the Maryland State Lottery also withholds 24% of any wins over $5,000 for federal tax. Wins between $601 and $5,000 must be reported manually on your tax returns.

Paying Tax on Horse Racing Bets

You have to pay tax on winning horse racing bets just as you would with other types of gambling income. This means wins over $5,000 will have deductions. Anything less and you'll need to complete a 502 (Maryland residents) or a 505 (non-residents) form. You'll also be issued with a W-2G for wins of $600 or more.

Follow this table as an example, assuming you have $60,000 taxable income and won $1,000 during the fiscal year: 
 

Note: The table uses a gambling tax calculator that assumes a standard deduction of $12,400 (if you're single)/$24,800 (if you're married). It doesn't include any municipal/local taxes.

Federal and MD Tax Rate

The amount of tax you pay on gambling winnings depends on your total income. We know gambling wins are subject to state and federal tax. State tax is fixed at 24%. State tax operates on a sliding scale between 2% and 5.75% (see the tables above).

What's important to note is that gambling wins are considered income. Therefore, prizes are added to the "other earnings" you declare. This means gambling wins from the best Maryland sportsbook apps could move you into a new tax bracket and increase the amount you pay.

Reporting gambling wins and losses is your responsibility. Licensed operators such as BetMGM Maryland sportsbook will withhold 9.25% of a resident's gambling winnings over $5,000. They are also legally obliged to withhold 7.5% of a non-resident's winnings over $5,000. As you can see, these rates are slightly different from what's withheld from lottery winnings.

Any wins between $500 and $5,000 must be declared manually when you file a tax return. Maryland residents can do this by completing a 502D Personal Declaration of Estimated Income Tax form. Non-residents must use the 505 Non-Resident Income Tax Return form. This must be done within 60 days.

Finally, any wins less than $500 don't have to be reported within 60 days. However, they still need to go on your tax return. All of this information goes on your tax return in conjunction with any deductions.

What are the consequences of not paying taxes on gambling? 

Gambling on your tax liabilities isn't a smart move. You need to know how to declare profits from sports wagering and other forms of gambling. Under-reporting could result in your paying less tax than you owe.

Paying less tax than you owe is a crime. The IRS receives copies of your W-2G forms automatically. This means they can check your filing status against official receipts. If they don't match, you've got a problem.

The IRS will fine you up to $435 for filing late. Additionally, you can be fined $5,000 or 10% of your tax bill for under-reporting. Basically, if you pay less than you owe, the IRS will fine you at least $5,000.

We've already explained that winnings can be withheld once you cross certain thresholds. Regardless of whether or not gambling winnings are withheld, you have to report all of the money you make. This is where a W-2G form comes in. We'll explain how these work in the next section.

For now, just know that you need to report gross revenue from gambling on your tax return. Losses can be used as deductions, but they need to be handled in specific ways. That means you can't simply report the difference between your wins and losses.

Form W-2G: Filling out the Maryland state tax form for gambling winnings tax

The final piece of the gambling tax puzzle is the W-2G form. Licensed MD betting operators like Caesars Maryland sportsbook issue W-2G forms when you win certain amounts. These forms are like receipts. They outline how much you won and what amount, if any, was withheld.

You need to include information from your W-2G forms on a tax return. You'll receive a W-2G form if your wins cross these thresholds:

• You win $1,200 or more from slots or bingo
• You win $1,500 or more from keno
• You win more than $5,000 from poker tournaments (buy-in fee is deducted from prize)
• You win $600 or more from pari-mutuel betting e.g. horse racing (this only applies if your win is 300X or more above the size of your bet)

You won't receive a W-2G for anything you win playing casino table games such as blackjack and roulette. However, the IRS expects players to track and declare these wins in the same way.

How to Report Gambling Income in Maryland

Maryland residents need to use IRS Form 1040 and Form 502 to report their gambling income for federal and state tax purposes. You need a Schedule 1 form to declare gambling winnings as "other income" on your 1040.

You need to detail all of your wins on the Schedule 1 using your own records and W-2G forms. The steps to follow are:

1. Step 1: Add up all the figures from your W-2G forms (in Box 1) and own records.
2. Step 2: Add the total to your "sources of income" on line 7a of Form 1040.
3. Step 3: If you have figures in Box 4 of your W-2G, add the total to Form 1040. The figures in Box 4 is withheld winnings. You need to add these up and put them with your total withholding for the year on Line 17 of Form 1040.
4. Step 4: Add the Schedule 1 to your 1040 and submit.

Once you've completed Form 1040 for the IRS, use Maryland Form 502 to report your gambling winnings to the state (if you're a resident). To do this, follow these steps:

1. Step 1: Take your gross income amount from IRS Form 1040.
2. Step 2: Add your adjusted gross income from Line 1 of IRS Form 1040.
3. Step 3: Add up all of the totals in Box 4 of your W-2G forms. This also goes into your 502 (on Line 40) to show how much has been withheld. Don't include money withheld in other states.
4. Step 4: Attach your W-2G forms to Form 502 and submit.

This information is used to calculate how much state income tax you owe based on all earnings, including gambling income. Finally, you may be liable for local tax if you live in Baltimore (3.2%) and 23 other counties in Maryland.

Maryland non-resident state tax form for filing gambling winnings

You may need to complete a non-resident tax revenue form (a 505) if you won money from gambling but live in a different state. You should use this form if you had money withheld and believe you're due a refund.

To complete Form 505, do the following:

1. Get all of your W-2G forms.
2. Check Box 13 for any amounts linked to Maryland.
3. Add up the figures in Box 4.
4. Input all of the tax on sports betting and gambling you paid in Maryland on Line 43 of your 505.
5. Attach copies of your W-2G forms to your 505 and submit them.

What to do if you don’t get a W-2G Form sent to you?

You still have to declare income from sports betting and gambling, even if you don't receive a W-2G. These forms are only issued when your winnings breach certain thresholds. If you don't win enough to receive a W-2G form, you need to track your own wins and losses.

Certain losses can be used as deductions. This can only be done if you report your total winnings and itemize your losses. Gambling and sports betting tax laws don't allow you to carry over losses from a previous year. Moreover, you can't claim more losses than winnings. For example, if you won $5,000 but lost $6,000, you can't claim a net loss of $1,000. In this example, you'd simply have $0 profit.

Gambling losses need to be entered on line 28 of a Schedule A form. This form is part of your 1040. Professional gamblers may be able to include other deductions linked to their gambling and sports wagering activities, such as travel expenses. However, the majority of people will be classed as recreational gamblers, so they can't make extra deductions.

The IRS may ask for proof of your wins and losses. This is why you need to itemize everything and, where possible, have receipts. You should also keep the following documents as part of your records:

• All W-2G forms
• Sports Wagering tickets showing the date, time, and location of where you gambled. These tickets should also document who you were with and the amounts you won and lost
• Check and casino credit records
• Bank statements showing any relevant gambling transactions

What if all or part of my gambling winnings are non-cash like a car?

Maryland sports betting and gambling operators may offer prizes instead of cash payouts. When it comes to taxes, the IRS classifies prizes in the same way as cash. In other words, if you win a car worth $30,000, it's taxed in the same way as a $30,000 cash payout rate, meaning you pay the same taxes.

To declare a prize for tax purposes, you need to complete a 1099. This form is provided by the entity that issues the prize. You need to enter details of the prize/s you've won on the 1099. Information from this form is then added to line 21 of IRS Form 1040 and used as part of your overall tax calculation.

The Maryland market has evolved in recent years. Voters and lawmakers approved a Maryland sports betting bill in 2020. The bill was eventually signed into law by Maryland Governor Larry Hogan in 2021. The Maryland Lottery and Gaming Commission subsequently approved the rules for legalizing sports betting.

These actions made retail betting legal in the state and, by the end of 2021, sportsbooks were live in five Maryland casinos. From December 2021 to July 2022, Maryland sports betting revenue was $3.2 million.

For clarity, the amount of money legal sports betting operators in Maryland keep as revenue (aka the hold) is 11.2%. That's higher than the national average of 7%. So, on this basis, Maryland is a great state for sports wagering if you're an operator.

Maryland's sports betting bill also contains provisions for online wagering. There are 60 online and mobile sports betting licenses available. The Sports Wagering Application Review Commission opened the application process in October 2022 and the expected launch date is December 2022.

The addition of online sports betting to retail betting should increase the amount of gambling tax revenue Maryland generates. Online operators in Colorado pay 10% and this generates more than $1.5 million in sports betting revenue per month. Maryland sports betting revenue could be higher than Colorado. Add to this the fact the rate is 15%, and the Free State could generate more than $2 million per month in tax revenue. 

The state officials have plenty of reasons to be excited about the launch date. Projected revenue numbers promise that good tax time is ahead for the Maryland market. Retail betting was the perfect insight into how much money the state could earn. Legal sports betting is an important revenue generator for

Maryland sports betting revenue goes towards the Blueprint for Maryland’s Future Fund (BMFF). This fund was created by Chapter 771. It replaced the Commission on Innovation and Excellence in Education Fund, and it helps schools, environmental initiatives, and public services. Money from casinos and sports betting taxes is also used to help county projects and the horse racing industry.