Michigan, the 20th US state to legalize sports betting after the overturning of the Professional & Amateur Sports Protection Act in 2018, has emerged as a gambling juggernaut. However, due to sports betting taxes in Michigan, punters don’t get to keep all of their winnings. Here's a comprehensive guide to underst𒐪anding and navigating these taxes.
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Gambling Winnings Taxes Overview
Michigan sports bettors must pay taxes on winnings from bets placed at both land-based and online Michigan sportsbooks or casinos. All winnings are taxable income, with taxes determined by the amount won. However, only winnings are taxed, not your stake.
For instance, if you place a $10 bet and win $30, just the $20 winnings are taxable. Great Lakes Stakes boasts a free ‘gaming tax calculator’, which you can use to estimate how much you’ll 𒐪be taxed.
Michigan Sports Betting Taxes in Numbers
Despite being a relatively late entrant to the legalization of internet sports betting, Michigan has beco𒅌me a gambling powerhouse, generating a huge amount of funds via taxation. Initially proje🍎cted to yield $19 million in annual tax revenue, as of August 2023, the state has amassed just under $1bn in lifetime tax revenue.
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Should I Pay Taxes on Land-Based Betting?
Land-based casino and online sports betting winnings are subject to Michigan’s flat income tax rate of 4.25%. This is applied to your net winnings only, meaning your total amount won minus any noted losses incurred during the tax year in question. You’re responsible for maintaining a precise record of your wins and losses at land-based casinos꧒ for your tax reports.
It’s the casino’s responsibility to issue a W-2G t✅ax form to those who win $600 or more, and at least 300 times the wager amount — which indicates the winnings and any federal taxes withheld.
Moreover, there🧜 are also federal income tax rates (dependent on an individual’s total income and tax bracket) to consider. These differ from Michigan’s state tax, which are imposed on winnings. Casinos are required🌺 to withhold 24% of your winnings for federal tax, but only if you win more than $5,000 and the winnings are at least 300 times the wager.
Online Casino Betting: Taxable Income
Similarly, any online winnings are subject to Michigan’s 4.25% state tax, and this includes winnings from welcome offers, which are common among online bookmakers.
All online bookies must issu൲e a W-2G form to those who win $600 or more and at least 300 times the wager amount. However, you’re responsible for your own bookkeeping of your total winnings.
Lottery Winnings
The Michigan State Lottery is laden with ga🔜mes and promotions, and any wi꧋nnings from the lottery are also subject to federal, state, and local taxation.
Here are some key points:
The Michigan Lotte🧜ry does not withho👍ld taxes on prizes $600 or lower.
L🐽ottery winnings/prizes in excess of $600 are categorized as income, so a W-2G form 💎is required for your tax filings.
Michigan does not withhold taxes on winnings from $601 to $5,000, but you must report these fundsꦇ to the Internal Revenue Service and th𒆙e Michigan Department of Treasury.
Winnings that exceed $5,000 must retain 24% for federal income tax. Prizes of this size are also subject to automatic withholdin෴gs at both state and federal tax levels. 4.25% is withheld for Michigan state t🦹ax
The Purpose of Michigan Sports Betting Taxes
Taxes will remain a source of contention wherever you are, but they 💙can prove beneficial if the money generate꧃d is used in the right way.
Michigan’s low tax rate means the state doesn’t collect as much in gambling taxes compared to other states, but the money earned can nonetheless go towards the improvement of local communities. The revenue can be directed and used for multiple ventures, with the taxes 🥃collected by online and land-based bookmakers/casinos going towards the state’s general fund.
These funds can then facilitate th🅺e improvement of public services and infrastructure, potentially aiding the development of initiatives regarding education and healthcare in Michigan, too. For example, of their Adjusted Gross Receipts directly to the School Aid Fund.
In Detroit, the state’s biggest city, 30% of taxes from operators linked to their casinos go towards public services, 65% to the internet gaming fund, while the remaining 5% is designated to the Michigan agriculture equine industry development fund.
How To Report Taxes on Sports Betting Michigan
Casinos hand punters a W-2G form, where they need to detail their winn🔜ings. The IR🌱S also receive a copy.
♍Here are the thresholds for receiving a W♈-2G form:
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Winning $1,200 or more from sl𒈔ot machines or bingo
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Winning $1,500 or more from a keno game
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Winning mo𒐪re than $5,000 from a poker tournamenꦆt (less the buy-in amount)
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Winning $600 or more from an event like horse racing if the payout was at least 300x the wager amoun♛t
Casinos are not liable to hand out forms for minor wins, so it’s your responsibility to keep༺ up to date with all your gambling winnings to ensure you can accurately declare them as part of yꦅour federal tax return.
Michigan Sports Betting Taxes
Michigan’s taxation structure can be divided into three𝄹 levels: individual, brand, and state. Here’s a breakdown of all three:
Individual State Taxes
Individuals are obliged to pay a 4.25% state tax on all their sports gamblin🗹g winnings. A federal tax on winnings is also imposed, with the casino/bookmaker withholding 24% for federal income taxes. This tax rate is dependent on an individual’s income and tax bracket.
Rules for Brands
Casinos and sportsbooks are also responsible for paying taxes and licensing fees to operate in Michigan. The size of their tax depends on the casino’s revenue streams. For example, major establishments such as the MGM Grand Detroit, MotorCity Casino, and Greektown Casino, are required to pay 10.9% of their adjusted gross revenue in city tax, as well as 8% in state tax. In 2022, these three casinos generated over $250 million in꧟ tax revenue.
Obtaining an internet gaming operator licence costs $100,000, with the application itself costing $50,00𝓰0. The annual fee to continue operating in Michigan is $50,000. Internet gaming suppliers are subject to an initial licence fee of $5,000, which is renewable for $2,500 each year thereafter.
State Tax Information
As well as Michigan’s flat 4.25% tax rate, there are also city taxes to consider. 24 cities✱ in the state have a local tax, and residents must pay a local income tax. Detroit’s local tax is 2.4%, Highland Park’s is 2%, and Grand Rapids and Saginaw is 1.5%. Others, including Albion, Jackson, Flint, and Hudson, all have a rate of 1%.
Michigan is able to generate masses in gambling tax via individu🦋al w🦹innings and licensing fees.
ThePuntersPage Final Say
Paying tax on your gambling winnings can be seen as a distinct inconvenience. However, Michigan’s 4.25% flat tax rate is f♉airly kind compared to other states, and t🥀axpayers can take some solace in knowing that a chunk of their income is going towards improving local areas and surrounding communities.
Resources
FAQs
Yes, b𓆉ut only your winnings. Stakes are not taxed.
Any winnings🅘 earned from gambling promotions are taxable.
The Michigan 4.25% state taꦐx is low compared to other US states. Cities in this state also impose local income taxes, which vary from 1% to 2.4%.
You can, but only if you itemize your deductions on your taxes. You’re only allowed to deduct losses equal to your w🎃innings. You can always check💯 official for more information about standard deduction and itemized deductions.
You will likely be penalized financially if you'🐻re caught not reporting your winnings to the IRS. Penalties vary depending on the amount of unreported state and federal taxes.
There are multiple tax forms, but the most common for sports bettors — and 🐷the one you use when declaring your winnings — is the W-2G form distributed by casinos. The 1099-MISC form is also common.
Yes, if you win money while on a visit to the state, you’re then required to declar𓄧e your winnings on your home state’s tax return. This will often be at Michigan’s ♎4.25% rate.