One thing all bettors should know: Income gained from Maryland online sports betting or in-person gambling, regardless of how or where you win, is subject to state and federal taxes. At BetMaryland, 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 we still advise you to consult a tax professional or financial advisor for further information and to avoid mistakes that could result in penalties.
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Tax rates depend on your annual income and tax bracket. Gambling income is subject to state and federal taxes but not FICA taxes. The rate will depend on your total taxable income (not just wages) minus deductions (standard or itemized) in Maryland.
The marginal tax rate is the bracket your income falls into. The effective tax rate is the percentage you pay after standard deductions, etc., and operates 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 |
