The Maryland Lottery enjoyed record sales in fiscal year 2022, as players spent over $2.6 billion on games and scratch tickets. The state’s $670 million cut also set a record.
So, just exactly how does Maryland spend that money?
Maryland initiatives benefit from lottery sales
Maryland was one of the first states to create a lottery system. In fact, the first Maryland Lottery tickets were sold way back in 1973.
The state, however, is a bit behind times when it comes to online sales. Players in Maryland must still physically visit a retailer in order to purchase tickets.
What the state isn’t lacking on, however, is the return on its longstanding Maryland Lottery investment. The lottery, after all, was established as a means of providing supplemental income to particular state initiatives.
As such, approximately 60% of all revenue from state lottery drawings and scratch off tickets is returned to winners. The remaining 40% (minus administrative costs) goes to the state.
With multi-state lotteries like Mega Millions and Powerball, approximately 50% of ticket revenue remains in the prize pool. The other half is split between participating states.
Distribution of Maryland Lottery revenue
Gaming revenue is the fourth-highest tax sum collected by Maryland each year, after income, sales and corporate taxes. And not surprisingly, 2022 was no different.
Maryland Lottery and Gaming set an all-time high in FY 2022, collecting $1.511 billion in revenue from all gaming. That amount includes funds from lottery sales, casino gambling, sports wagering and daily fantasy sports.
Revenue from lottery sales alone contributed around $670 million — that’s nearly half of all revenue collected.
This lottery contribution then goes into the Maryland General Fund, which provides funding for a number of programs, such as education and public health and safety services.
As far as where Maryland gambling money goes from casinos and sports betting, several different entities benefit.
For instance, here’s a look at the overall distribution of Maryland’s FY 2022 casino gaming revenue:
- Casinos’ share: $1.2 billion (57.8%)
- Maryland Education Trust Fund: $611.6 million (30.5%)
- Local Aid: $105.9 million (5.3%)
- Horse Racing: $90.8 million (4.5%)
- Small, minority, women-owned businesses: $19.6 million (1%)
- Operating expense contribution: $13.3 million (0.7%)
- Responsible gaming: $4.5 million (0.2%)
Despite a decline in Maryland casino revenue in December 2022, the year overall what a record-setting success. Casinos broke records three times in 2022, with revenue on a steady incline since they reopened in 2020.
Looking ahead, FY 2023 offers plenty of optimism for yet another big year.
The Maryland Lottery should continue setting new records on its own. And now that online sports betting is live, 2023 should prove to be a record-setting year for Maryland gaming overall.
Federal & state taxes on lottery winnings
Lottery jackpots can be massive. Just this January, the Mega Millions jackpot skyrocketed to a near-record $1.35 billion.
The lucky winner of these substantial sums never takes home the full amount, though. When it comes to paying taxes on Maryland Lottery winnings, withholdings are split between federal and state taxes. And the percentage varies depending on the amount won and individual state laws.
If you’re a resident, the state of Maryland withholds a sizable 8.95% from all lottery winnings over $5,000. If you’re not a resident, 8% is withheld. Wins between $601 and $5,000 must be reported by winners on their tax returns.
Maryland State Lottery adheres to federal tax laws by withholding 24% for the IRS on any wins over $5,000. Depending on the amount, winners may owe additional taxes based on income.
Maryland is on the higher end when it comes to state tax withholdings. New York withholds the highest amount at 10.9%, followed by Maryland‘s 8.95%. North Dakota withholds the lowest amount — just 2.9% for winnings over $5,000.
Most states set the minimum threshold for state tax at $5,000, but a few states set their minimum threshold anywhere from $500 – $1,000.
There are also some states and US territories that do not withhold any state taxes from lottery winnings.
After these funds are either withheld or reported on your next tax return, those tax dollars contribute to state debt reduction and various Maryland programs, such as:
- State infrastructure
- Public pensions
- Public assistance