Tax Day, also known as April 18, is swiftly approaching, marking the deadline for your income tax returns to be officially submitted.
Uncle Sam (and Lansing) appreciate it when you submit your taxes promptly, regardless of your preference.
Consumers in Michigan should take note that they are required to pay taxes on any winnings obtained through online sports betting and online casinos, now that it is legalized in the state. The amount owed and the applicable tax rate are determined by various factors.
If you find yourself uncertain about Michigan taxes on gambling winnings, this article is an authoritative guide. However, if you still have doubts, it is advisable to consult a tax professional for assistance.
Can I deduct my gambling losses in Michigan?
To a certain degree, individuals in Michigan are permitted to claim deductions for their gambling losses.
In December 2021, Governor Gretchen Whitmer approved a bill granting Michigan gamblers the ability to claim tax deductions on their gains and losses.
The amendment was made to the Income Tax Act of 1967, introducing a policy that permits individuals to subtract their gambling losses up to the total amount they have won throughout the year.
If, for instance, you gained $2,500 through gambling but incurred losses of $4,500, you are only eligible to deduct $2,500 from those losses.
If you choose to itemize your deductions on Schedule A (Form 1040) for your federal tax returns, you are eligible to deduct gambling losses. However, it is essential to maintain a record of your winnings and losses.
Just like with your Michigan taxes, you are not allowed to deduct more losses than the amount of gambling income you report.
How much will be withhold from my winnings in Michigan?
In Michigan, gambling operators, including casinos and sportsbooks, whether they operate in physical locations or online platforms, are required to deduct 25% of your winnings for federal taxes in two specific situations:
- If you win over $5,000 and
- The amount you win is at minimum 300 times greater than your bet.
Your winnings in all other bets will be paid out in full, without any taxes deducted. However, it is important to note that you are still responsible for paying taxes on the winnings.
Regardless of the fact that you wagered $1 and received a $12 prize, it is mandatory according to Michigan and Federal regulations to report these earnings as income and fulfill your tax obligations on the awarded sum.
It is your responsibility to report the amount of your winnings on your next income tax statement as sports betting operators and casinos in Michigan do not withhold taxes from your winnings.
Gambling winnings in Michigan are subject to the same tax rate as regular income, which is 4.25% when filing your annual state income tax form.
MI sportsbooks that make it easy to track gambling income
Certain sportsbooks in Michigan offer resources for tracking your gambling profits or losses.
- To access a summary of your betting activity on DraftKings, simply navigate to the “Financial Center” section within your account.
- You have the option to download a file containing your betting history from Caesars Sportsbook MI and BetMGM. This file can then be easily imported into accounting software such as Quickbooks.
- If you have an account with most online casinos in Michigan and need to track your winnings or losses, you have the option to request a betting statement from them.
Michigan cities that tax betting income
In addition to federal and state taxes, certain cities in Michigan also impose taxes on gambling earnings.
- A tax rate of 2.4% is applied to winnings in Detroit.
- Gambling winnings in Highland Park are subject to a 2% tax.
- In both Grand Rapids and Saginaw, the tax rate stands at 1.5%.
- Gambling winnings in the following cities in Michigan are subject to a 1% tax: 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
Michigan gamblers need to be knowledgeable about the following federal tax forms.
- The document titled “Certain Gambling Winnings (W-2G)” is applicable solely when an individual secures a win of $600 or higher in a single bet and the amount won is at least 300 times the initial wager.
- If you happen to win $600 or more from a single casino operator in a calendar year, you may be given or required to utilize the Miscellaneous Income form (1099-MISC). The taxable amount is determined by subtracting your initial bet from your overall winnings.
- If you made use of a payment processor such as PayPal while engaging in gambling activities, you will need to complete the 1099-K Form. This form is specifically designed for reporting payment card and third-party network transactions.
- To meet certain identification requirements, certain online casinos may ask you to fill out a W-9 Form, also known as the Request for Taxpayer Identification Number and certification. It is important to note that if your recorded winnings exceed a certain limit, both the IRS and Michigan Department of Treasury may request information about your betting winnings.
When filling out the standard 1040 U.S. Individual Income Tax Return, it is necessary to report any earnings from gambling under the category of “other income”.
When do you receive tax forms from Michigan betting operators
It is a legal requirement for gambling operators to provide tax forms to individuals. Nevertheless, it is important to note that regardless of whether or not you receive these forms, you are still obligated to pay taxes on any winnings.
- Once you win $1,200 or more from bingo games or slot machines, it is mandatory for you to obtain a W-2G form for your winnings.
- In order to participate in a poker tournament, whether it is held at a physical casino or as part of a Michigan online poker event, players must have accumulated at least $5,000 in winnings.
- In order to be eligible for a tax form concerning your winnings, it is necessary to achieve a minimum of $1,500 in Keno winnings.
Michigan Lottery Winnings are Taxable Income
Over the years, the Michigan Lottery has consistently awarded substantial payouts to its players.
Lottery winnings are subject to taxation for residents of Michigan.
Just like with casino and sports betting, lottery winnings will be subject to a 4.25% tax by the state.
Mierendorf and Co. P.C., a Grand Rapids area accounting firm, states that lottery winnings may be subject to federal taxes of up to 37%.
