Michigan Gambling And Taxes

Updated on January 30, 2020

The thrill of collecting on gambling winnings is almost always followed up by questions about taxes.

Yes, gambling winnings, whether they come from slots, table games, horse racing, sports betting, poker or the lottery, are considered taxable income.

As such, you are required to report gambling winnings as income on your tax return. Win a car, boat, motorcycle or other prize, and you’ll need to report that, too.

There are plenty of questions surrounding Michigan taxes and gambling winnings. Perhaps even more now that sports betting and online casinos are legal across the state.

Here are some of the answers:

How much are my gambling winnings taxed?

Win $5,000 or more, and Michigan casinos will withhold 25% of your winnings as long as you provide a Social Security number. They’ll withhold 28% if you don’t.

That should be enough to satisfy your federal income tax responsibilities, but you’ll still need to handle the state tax.

Currently, Michigan has a flat income tax system. That means all income earners of all levels pay the same rate: 4.25% of taxable income.

Taxable income includes gambling and lottery winnings.

Federal Form W-2G, Certain Gambling Winnings

In most cases, the casino that withholds your winnings will pay that amount to the IRS. The casino will also issue you and the IRS a receipt for the winnings, otherwise known as Form W-2G, Certain Gambling Winnings.

Form W-2G is a way of reporting winnings to you and the IRS.

However, W-2Gs are only issued if the following thresholds are met:

  • The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine.
  • The winnings (reduced by the wager) are $1,500 or more from a keno game.
  • The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament.
  • The winnings (except winnings from bingo, slot machines, keno or poker tournaments) reduced, at the option of the payer, by the wager are:
    $600 or more, and
    ○ At least 300 times the amount of the wager.

Whether a W-2G is issued or not, all gambling winnings are subject to federal income tax.

How to report gambling winnings on your taxes

According to the IRS, you must report the full amount of your gambling winnings each year on Form 1040, U.S. Individual Income Tax Return, line 21.

You may have received a W-2G showing the amount of certain gambling winnings and any tax withheld.

Just include the gambling winnings on box 1 on Form 1040, line 21. Plus, add the amount withheld on box 2 on Form 1040, on the line designated as federal income tax withheld.

What if I don’t receive a Form W-2G?

Whether a W-2G is issued or not, all gambling winnings are still considered taxable income and subject to federal income tax.

If a casino withholds any amount for federal taxes, it is required to issue you a W-2G.

Either way, you must report all gambling winnings as “Other Income” on Form 1040, Schedule 1 (PDF) and attach this to Form 1040.

This includes winnings that aren’t reported on a W-2G.

You are required to report all gambling winnings for federal and Michigan taxes. If you hit a certain threshold, casinos will withhold money. In instances where a casino hasn’t done its job and has failed to send you a W-2G, you are still required to report your winnings and any taxes already withheld.

Do I have to pay taxes if a group of people win the lottery?

What happens when a group of coworkers chip in on a lottery ticket that wins? What about you and a friend who put money on a long-shot team to win the championship?

IRS Form 5754 is used when the person receiving gambling winnings subject to reporting or withholding is not the actual winner or is a member of a group of two or more people sharing the winnings.

Fill out Form 5754 when you claim your winnings from a casino and keep a copy for your records. Casinos will use it for preparation of a W-2G for each person listed as a winner.

Do I have to pay taxes in Michigan if I win?

In addition to federal taxes payable to the IRS, Michigan levies a 4.25% tax on all taxable income, including gambling winnings.

You should report your Michigan gambling winnings on your Michigan individual income tax return.

If your gambling winnings come during a trip to another state or country, you are still required to report them.

You must include all gambling and lottery winnings on the line for “Alimony and other taxable income” on the MI-1040CR, MI-1040CR-2 or MI-1040CR-7.

Are there any deductions available for taxes related to gambling?

Gambling losses can be deducted on your federal income tax return. However, they must be itemized on line 28 of Schedule A, Form 1040.

You cannot deduct more than your winnings, and expenses related to any gambling or lottery activities cannot be deducted.

The key is to keep the following records:

  • The date and type of each wager
  • The name and location of the bet
  • The amount won or lost
  • Wagering tickets
  • Canceled checks
  • Credit card records

If you use a players club/members card, casinos can track your spending and provide a win/loss report that will give you a good sense of your gambling activity. Online casino players can request the same report, and most sites should be able to provide it.

Unfortunately, the Michigan Income Tax Act has no provision to subtract your losses on the Michigan individual income tax return. You cannot net the winnings and losses.

However, the law does allow you to exclude the first $300 won from gambling, bingo, awards or prizes from total household resources.

Taxes on multistate lotteries

Michigan considers multistate lottery prizes, like those from Powerball and Mega Millions, awarded on tickets purchased through a licensed Michigan state lottery ticket vendor, a prize awarded by the Michigan Lottery. As such, the prize is taxable income.

What happens if you win a few thousand dollars on a winning MI lottery ticket?

Lottery winnings are taxable income. Michigan Lottery winners of a prize valued at more than $600 will have taxes withheld and receive a W-2G in the mail.

Talk to an attorney or accountant about the tax implications if you win a large sum of money.

Sports betting winnings and taxes

Sports betting winnings are taxable income as well.

The IRS states:

“Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”

Despite the fact that sports betting isn’t specifically listed, it falls under the umbrella of “gambling winnings.”

You should receive a W-2G from wherever the win occurred. Sports betting losses might also be used as deductions on a federal tax return if you itemize your deductions and keep a detailed record of wins and losses.

Michigan residents will generally owe up to 25% of winnings to the federal government in addition to the 4.25% Michigan tax on gambling winnings.

Online gambling and taxes

Sports betting apps and online casinos certainly provide convenience. There’s also some anonymity in playing behind a screen name.

However, winning on an online casino or sports betting app comes with the same tax responsibilities. Online gambling winnings are considered taxable income at the same rate as other gambling winnings.

For online gambling winnings, online gambling operators issue W-2Gs if the winner reaches the following thresholds:

  • The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine.
  • The winnings (reduced by the wager) are $1,500 or more from a keno game.
  • The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament.
  • The winnings (except winnings from bingo, slot machines, keno and poker tournaments) reduced, at the option of the payer, by the wager are:
    $600 or more, and
    ○ At least 300 times the amount of the wager.

In terms of federal deductions for taxes, players can request a report from online casinos and sports betting apps detailing wins and losses.

Privacy Policy