Maryland Lottery prizes are taxable income. For a prize larger than $5,000, the Maryland Lottery says it withholds 24.0% for federal tax, plus 9.5% Maryland tax for Maryland residents or 8.75% for non-Maryland residents. Those percentages are withholding, not a guarantee that your final tax bill is paid in full. Prizes from $601 through $5,000 are taxable and must be reported, but the amount ultimately owed depends on your complete tax situation.
The IRS requires you to report gambling winnings, including lottery prizes, on your federal return even if the payer does not issue Form W-2G. Depending on your income and withholding, you may also need estimated tax payments. The rules below reflect Maryland Lottery and IRS guidance available for 2026; verify the instructions for the tax year in which you claim your prize.
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Maryland lottery tax rates at a glance
The Lottery’s claim instructions divide the practical treatment by prize size and residency. The threshold controls when the Lottery lists automatic federal and state withholding; it does not determine whether a smaller prize is taxable.
| Prize or winner category | What the Maryland Lottery says | What you still must do |
|---|---|---|
| More than $5,000, Maryland resident | 24.0% federal withholding and 9.5% Maryland withholding | Report the winnings and reconcile withholding with your final federal and Maryland tax returns. |
| More than $5,000, non-Maryland resident | 24.0% federal withholding and 8.75% Maryland withholding | Report the winnings and determine any federal, Maryland, home-state or local obligations that apply to you. |
| $601 to $5,000 | Taxable and reportable; the Lottery does not state one universal tax amount. | Include the prize on your tax return. Your filing status, income and other circumstances affect the result. |
| $600 or less | The Lottery’s cited threshold does not describe automatic withholding for this range. | Gambling winnings are still generally taxable income under federal law and must be tracked for reporting. |
The rates and threshold are administrative withholding rules, not statistics about the average tax paid by winners. The Maryland Lottery’s current instructions are at How to Claim a Prize.
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Withholding is not your final tax bill
Withholding is money sent to the tax authorities on your behalf when the prize is paid. Your final liability is calculated later on your returns after considering the prize, your other income, deductions, credits, filing status and any applicable state rules. If withholding exceeds the final liability, a refund may result; if it is insufficient, you may owe more. The Lottery does not calculate an individual winner’s final federal or Maryland tax.
Do not describe a 24.0% federal or 9.5%/8.75% state deduction as a complete “jackpot tax.” It is an amount withheld under the Lottery’s process. A large prize can move you into higher federal or state marginal brackets, while other income and deductions can change the effective result. A non-Maryland resident may also have filing questions in Maryland and in the state where the person lives; the cited Lottery and IRS pages do not establish every nonresident or local-tax outcome.
Federal reporting: every lottery prize is income
IRS Topic no. 419, Gambling income and losses, says gambling winnings, including lottery winnings, are taxable and must be reported. That requirement applies even when no Form W-2G is issued. Report the amount on your federal Form 1040 or Form 1040-SR using the instructions for the year of the win.
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When estimated tax may be necessary
Withholding on a prize may not cover the tax generated by the prize and your other income. The IRS explains estimated-tax obligations in Publication 505 (2026), Tax Withholding and Estimated Tax. Review whether you need an estimated payment rather than waiting until the annual return is due. The correct answer depends on your total projected income, prior withholding and applicable safe-harbor rules, so do not treat the Lottery’s percentage as an estimated-tax calculation.
How the $5,000 threshold works
Prizes larger than $5,000
For prizes above $5,000, the Maryland Lottery lists 24.0% federal withholding. It lists Maryland withholding of 9.5% for Maryland residents and 8.75% for non-Maryland residents. IRS 2026 instructions for Forms W-2G and 5754 describe 24% federal withholding for qualifying lottery winnings above $5,000 after subtracting the wager. The exact withholding statement and amount should appear in your claim or payment records.
Because the threshold is stated as “larger than $5,000,” do not automatically apply the listed withholding percentages to a prize of exactly $5,000. Follow the Lottery’s instructions for the specific ticket and payment. Regardless of withholding, the prize remains reportable income.
Prizes from $601 through $5,000
The Lottery says prizes of $601 to $5,000 are taxable and must be reported, while the amount of tax depends on the winner’s circumstances. This range can therefore produce no single universal “Maryland lottery tax” number. Include the prize in your records and return even if no tax was taken out at the counter.
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Prizes of $600 or less
Maryland retailers can redeem prizes up to and including $600. The federal rule is broader than the Lottery’s withholding threshold: gambling winnings are taxable and reportable even when no Form W-2G is provided. Keep a complete list of smaller wins rather than assuming a retail redemption is tax-free.
Resident and nonresident withholding compared
| Winner’s Maryland status | Maryland withholding on a prize above $5,000 | Important qualification |
|---|---|---|
| Maryland resident | 9.5% | This is withholding, not the final Maryland tax calculation. |
| Non-Maryland resident | 8.75% | The rate does not by itself resolve filing or tax obligations in another state or any local jurisdiction. |
Use the residency status that applies under the Lottery’s claim process. If your residency changed during the year or your circumstances are unusual, obtain tax advice before assuming one rate settles every filing issue.
Shared tickets, group wins and annuity payments
Ownership matters. If several people bought a ticket together, document each person’s beneficial share before the prize is paid. IRS 2026 instructions for Forms W-2G and 5754 address shared winnings and the payer’s Form 5754 process where applicable. A single claimant should not simply report the entire prize for convenience if other people actually own portions.
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How to claim a Maryland Lottery prize
Tax compliance starts with a valid claim. The Maryland Lottery’s claim instructions set out these practical requirements:
- Protect the ticket. Sign and store it securely, and make a copy for your records before submitting it.
- Confirm the deadline. Draw-game tickets must be redeemed within 182 days of the drawing date. Scratch-off deadlines vary by ticket, so check the individual ticket and current Lottery instructions.
- Bring identification for larger claims. A prize above $600 requires proof of your Social Security number or Federal Tax ID and photo identification.
- Choose an authorized location. Retailers can redeem prizes up to and including $600. Prizes up to $5,000 may be redeemable at participating XCAP retailers. Maryland Lottery headquarters and Maryland casino cashier windows can redeem prizes up to $25,000.
- Make an appointment when required. Claims at Lottery headquarters require an appointment. Prizes above $25,000 must be claimed at headquarters.
- Keep the payment and tax records. Headquarters pays prizes up to $25,000 by check, and larger claims may take at least 30 business days to process, according to the Lottery’s instructions. Preserve the check, any W-2G, withholding statement and claim receipt.
These are claim logistics, not additional tax rates. A deadline or payment method does not change the requirement to report taxable winnings.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to do after the prize is paid
Build a tax file
- Keep the original ticket and a copy showing its identifying information.
- Save the claim form, identification records and payment statement.
- Record the gross prize, the wager amount when relevant, federal withholding and Maryland withholding separately.
- For a group ticket, retain the ownership agreement and each person’s distribution.
- Track annuity payments by calendar year rather than treating the entire schedule as one payment.
Match forms to your return
Compare the amounts on your W-2G or other payer statement with the income and withholding entered on your federal return. Report the prize even if a form is missing, then contact the payer to correct documentation. Use the Maryland return instructions for the filing year to determine how the winnings and withholding flow through the state return.
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Plan for a balance due
If the withholding appears lower than your projected total tax, set money aside and examine estimated-payment requirements promptly. A tax professional can be useful for a very large prize, a shared ticket, an annuity, a residency change or substantial other income. Professional help is optional; the Lottery does not require you to purchase a tax product or service to claim a prize.
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Protect yourself from lottery-payment scams
Do not pay an advance “tax,” fee or transfer charge to release a prize. The Maryland Lottery and Gaming Control Agency states in its official Fraud Prevention guidance: “Legitimate lotteries never require winners to make upfront payments in order to receive their prizes.” A real tax withholding is handled through the authorized payer and documented in the claim and payment records; it is not a wire transfer to a stranger.
- Do not send cash, gift cards, cryptocurrency or bank credentials to someone who contacts you unexpectedly.
- Verify a claim through the Maryland Lottery’s official contact channels, not a phone number or link supplied in an unsolicited message.
- Be wary of requests for secrecy, urgent payment or copies of identity documents before you have verified the claim.
Questions Maryland winners commonly ask
Does Maryland tax lottery winnings?
Yes. The Maryland Lottery lists state withholding of 9.5% for Maryland residents and 8.75% for non-Maryland residents on prizes larger than $5,000. Your final Maryland liability can differ from the amount withheld.
How much tax is taken from a Maryland jackpot?
For a prize larger than $5,000, the listed withholding is 24.0% federal plus the applicable 9.5% or 8.75% Maryland rate. The deduction is not a final-tax estimate, and the precise payment record controls.
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Do I owe tax on a $1,000 Maryland Lottery prize?
The Lottery says prizes from $601 to $5,000 are taxable and must be reported. The final amount depends on your complete tax circumstances, so there is no single tax bill for every $1,000 winner.
What if I never receive Form W-2G?
You still must report taxable gambling winnings. IRS Topic no. 419 expressly says reporting does not depend on receiving Form W-2G.
Can someone else claim our group ticket?
Group ownership should be documented and reported accurately. Follow the payer’s Form 5754 process where applicable rather than having one person report the entire prize simply for convenience.
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