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Michigan, the 20th US state to legalize sports betting after the overturning ofšŸŽƒ the Professional & Amateur Sports Protection Act in 2018, has emerged as a gambling juggernaut. However, due to sports betting taxes in Michigan, punters donā€™t get to keep all of their winnings. Here's a comprehensive guide to understanding and navigating these taxes.

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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 ā€˜gaming tax calculatorā€™, which you can use to estimate šŸ„€how much youā€™ll be taxed.

Despite being a relatively late entrant to the legalization of internet sports betting, Michigan has become a gambling powerhouse, generating a huge amount of funds via taxation. Initially projected to yield $19 million in annual tax revenue, as of August 2023, the state has amassešŸŒ„d 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 Michiganā€™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. Youā€™re responsible for maintaining a precise record of your wins anź¦«d losses at land-based casinos for your tax reports.

Itā€™s the casinoā€™s responsibility to issue a W-2G tax form to thoseź¦« who win $600 or more, and at least 300 times the wager amāœ±ount ā€” which indicates the winnings and any federal taxes withheld.

Moreover, there are also federal income tax rates (dependent on an individualā€™s total income and tax bracket) to consider. These differ from Michiganā€™s state tax, which are imposed on winninź¦—gs. 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 Michiganā€™s 4.25% state tax, and this includes winnings from welcome offers, which are common among online bookmakers.

All online bookies muāœ…st issue a W-2G form to those who win $600 or more and at least 300 times the wager amount. However, youā€™re responsible for your own bookkeeping of your total winnings.

The Michigan State Lottery is laden with games and promotions, and any winnings from the lottery aršŸ­e alsoź¦• subject to federal, state, and local taxation.

Here are some key points:

  • The šŸŒ³Michigan Lottš“‚ƒery does not withhold taxes on prizes $600 or lower.

  • Lottery winnings/prizes in excess of $600šŸ· are categorized as incšŸŸome, so a W-2G form is required for your tax filings.

  • Michigan does not withhold taxes on winnings from $601 tšŸ’œo $5,000, but you must report these funds to the Internal Revenue Service and the Michigan Department of Treasury.

  • Winnings that exceed $5,000 must retain 24% for federal income taąµ²x. Prizes of this size are also subject to automatic withholdings at both state and federal tax levels. 4.25% is withheld for Michigan state tax

Taxes will remain a sourcš’ƒe of cšŸ“–ontention wherever you are, but they can prove beneficial if the money generated is used in the right way.

Michiganā€™s low tax rate means the state doesnā€™t collect as much in gambling taxes compared to š•“othą½§er 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 stateā€™s general fund.

These funds can then facilitate the improvement of public services and infrastrušŸŽcture, potentially aiding the develoź¦¦pment 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 stateā€™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.

michigan tax form screenshot
(Source: IRS)

Casinos handāœ… punters a W-2G form, where they neeź¦‰d to detail their winnings. The IRS also receive a copy.

 Here are the thresholds for receiving a W-2G fošŸŸrmā™”:

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    šŸ…ŗWinning $1,200 or more from slot machines or bingo

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    Winning $1,500 or more from a keno game

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    Winning more than $5,000 from a poker tournament (lessšŸŽ€ the buy-in amount)

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    Winning $600 or more from an event like horse racing if the payout wšŸƒas at least 30šŸŒ„0x the wager amount

Casinos are not liableā˜‚ to hand out forms for minor wins, so itā€™s your responsibility to keep up to date with all your gambling winnings to ensure you can accurately declare them as part of your federal tax return.

Michiganā€™s taxation structure can be divided into three levels: indivÜ«idual, brand, and state. Hereā€™s a breakdown of all three:

Individual State Taxes

Individuals are obliged šŸøto pay a 4.25% state tax on all their sports gambling 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 individualā€™s income and tax bracket.

Rules for Brands

Casinos and sportsbooks are also responsible for paying taxes and licensing fšŸŒees to operate in Michigan. The size of their tax depends on the casinoā€™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 asā™ 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, withź¦š the application itself costing $50,000. 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 tšŸ”“hereafter.

State Tax Information

As well as Michiganā€™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. Detroitā€™s local tax is 2.4%, Highland Parkā€™s is 2%, and Grand Rapids and Saginaw is 1.5%. Others, including Albion, Jackson, Flint, and Hudson,ā™ˆ all have a rate of 1%.

Michigan is able to generate masses in gambling tax via individuašŸŽ€l winnings and licensing fees.

Paying tax on your gambling winnings can be seen as a distinct inconvenience. However, Michiganā€™s 4.25% flat tax rate is fairly kind compared to other statšŸŒ³es, and taxpayers can take some solace in knowing that a chunk of their income is going towards improving local areā–Øas and surrounding communities.

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YešŸ˜¼s, but only your winnings. Stakes are not taxed.

Any winšŸ“–nings earned from gambling proš“”motions are taxable.

The Michigan 4.25% state tax is low compared to other US states. CitiešŸøs in this state also impose local income taxes, wź©²hich vary from 1% to 2.4%.

You can, but only if you itemize your ą²ždeductions on your taxes. Youā€™re only allowed to deduct losses equal to your winnings. You can always check official for more information about standard deduction and itemized deductions.

You will likely be penalized financially if you're caught nšŸŒ³ot reporting your winnings to the IRS. Penaltš’…Œies vary depending on the amount of unreported state and federal taxes.

There are multiple tax forms, but the most common for sports bettors ā€” and the one you usšŸŽ€e when declaring your wišŸ“–nnings ā€” 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, youā€™re š“€then required to decāœ±lare your winnings on your home stateā€™s tax return. This will often be at Michiganā€™s 4.25% rate.

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ā™” WRITTEN BY Jš“„§ames Cormack  View all pāœ…osts by James Cormack  šŸ”“

Big sports fan sšŸ…pecialising in football.šŸŒŠ Experienced the lows of Vlad Chiriches and Tim Sherwood as a Spurs fan along with the more recent ā€˜successā€™ under Pochettino. My following of the New England Patriots since 2012 somewhat makes up for the lack of silverware produced by Spurs in my lifetime.

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