April 18 is fast-approaching. That date is commonly known as “Tax Day,” because that’s the day your income tax returns must be stamped.
Whether you like it or not, Uncle Sam (and Lansing) like it when you send your taxes in on time.
With online sports betting and online casinos legal in Michigan, consumers should be aware that they must pay taxes on any winnings they accrued in the previous tax year. The rate and how much you owe depend on several factors.
This article serves as the definitive guide to Michigan taxes on gambling winnings. But, if you are still feeling unsure after reading this, contact a tax professional.
Can I deduct my gambling losses in Michigan?
In Michigan, you are allowed to deduct your gambling losses, to an extent.
It was an amended bill from the Income Tax Act of 1967. The policy allows you to deduct your gambling losses up to the amount you won during the year.
For example, if you win $2,500 from gambling but lost $4,500, you can only deduct $2,500 of those losses.
Regarding your federal tax returns, you may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040). You also have to have kept a record of your winnings and losses.
Similar to your Michigan taxes, the number of losses you deduct can’t be greater than the amount of gambling income you report.
How much will be withhold from my winnings in Michigan?
In Michigan, gambling operators (casinos and sportsbooks, both retail and online) are mandated to withhold 25% of your winnings for federal tax in two instances:
- If you win more than $5,000 AND
- Your winnings are at least 300 times larger than the wager.
In all other bets, your winnings will be paid out without taxes removed. That does not mean you are not responsible for paying taxes on the winnings.
Even if you bet $1 and win $12, you are required by Michigan and Federal law to claim those winnings as income and pay taxes on the amount.
Sports betting operators and casinos do not withhold Michigan taxes from your winnings. You are responsible for reporting that figure on your next income tax statement.
Michigan taxes gambling winnings at the same rate as income, 4.25% on your annual state income tax form.
MI sportsbooks that make it easy to track gambling income
Some Michigan sportsbooks provide tools to help you keep tabs on your gaming winnings or losses.
- On DraftKings, you can go to the “Financial Center” section in your account to see a statement sheet of your betting activity.
- Caesars Sportsbook MI and BetMGM allow you to download a file with your betting history. That file can be imported into an accounting program like Quickbooks.
- You can request a betting statement from most Michigan online casinos if you have an account with them and had winnings or losses you want to account for.
Michigan cities that tax betting income
Along with federal and state taxes, some Michigan cities also will tax gambling income.
- In Detroit, winnings are taxed at 2.4%
- Highland Park taxes gambling winnings at 2%
- The tax rate is 1.5% in Grand Rapids and Saginaw
- Each of these MI cities tax gambling winnings at 1%: Albion, Battle Creek, Benton Harbor, Big Rapids, East Lansing, Flint, Grayling, Hamtramck, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Springfield and Walker
Important Michigan tax forms
For Michigan gamblers, you should be aware of these federal tax forms:
- Certain Gambling Winnings (W-2G): Only should be used if you win $600 or more in a single bet and the winnings are at least 300X your stake.
- Miscellaneous Income (1099-MISC): If you are lucky enough to win as much as $600 in a calendar year from a single casino operator, you may receive or use this form. The taxable amount is based on your winnings minus your stake.
- The 1099-K Form: For payment card and third-party network transactions. Use this if you utilized a payment processor like PayPal when gambling.
- Your W-9 Form: Some online casinos may require that you complete a W-9 Request for Taxpayer Identification Number and certification. This is typically done for identification purposes, but if you record winnings above a threshold, you will need to be cognizant that the IRS or Michigan Department of Treasury can request your betting winnings amount.
On your typical 1040 U.S. Individual Income Tax Return you must place any gambling winnings in the “other income” box.
When do you receive tax forms from Michigan betting operators
By law, you must be issued tax forms from gambling operators. However, be advised that even if you do not receive the forms, you must still pay taxes on winnings.
- You are required to receive a W-2G form for winnings from bingo games or slot machines once you win as much as $1,200.
- The threshold for a poker tournament, whether at a retail casino or in a Michigan online poker event is $5,000 in winnings.
- You must win at least $1,500 in Keno to qualify to receive a tax form for winnings.
Michigan Lottery Winnings are Taxable Income
The Michigan Lottery has been making large payouts to its players over the years.
Michiganders must pay taxes on lottery winnings.
Similar to casino and sports betting activity, the state will tax lottery winnings at the rate of 4.25%.
According to Grand Rapids area accounting firm Mierendorf and Co. P.C., federal taxes could be “as high as 37%,” on lottery winnings.