Yes, You Have To Claim Michigan Gambling Winnings On Your Tax Return

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We aim to avoid causing any distress or burden, but it is important to inform you that the deadline for your taxes is approaching. Additionally, it is necessary to account for your gambling winnings.

Don’t worry about the deadline, as we’re here to assist you in comprehending the process of reporting your gambling winnings on your federal tax returns before April 18.

You can find a detailed explanation of how taxes are related to gambling winnings. Here’s a summarized version for a quick understanding.

If you have larger or more specific inquiries, it is recommended to reach out to a tax professional.

Are gambling winnings taxable?

The state of Michigan didn’t legalize online gambling solely for your entertainment purposes.

While it’s true that it’s an additional advantage, the primary motivation for the government was to generate tax revenue. Thus far, online casinos and poker have already contributed approximately $201.7 million in state tax revenue in 2021, while online sports betting has generated just under $7.3 million.

It’s time for you to take the reins now. Please note that all of your winnings are subject to taxation.

Gambling winnings are subject to a federal tax rate of 25%, whereas in Michigan, the rate is 4.25%.

If you’ve recently won a substantial jackpot or made a significant wager, you should be aware of this fact. Whenever you achieve a win of $5,000 or higher, the casinos are obligated to withhold 25% of the amount for government taxes.

There exist various situations that compel a casino to take action.

• The combined bet and profit from playing a slot machine surpass $1,200 in total winnings.
• A game of keno yields a profit exceeding $1,500 for a player.
• A poker player emerges victorious in a tournament, earning a prize exceeding $5,000.
• The profit of a game exceeds $600 and is at least 30 times the amount of the bet.

Casinos are required to file Form W2-G and report the winnings to the IRS in all these instances.

Do small gambling winnings have to be claimed in tax returns?

It is your responsibility to report your smaller winnings as they will not be automatically recorded.

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Like any interaction involving the IRS, there are forms that need to be completed. To begin, one must report their income on the IRS Schedule 1, which serves as the form for reporting additional income and adjustments to income.

In Part I of the form, locate Line 8 titled “other income.” This is where you need to record your earnings and their origin. In most cases, it is acceptable to simply mention “gambling” or “casino” as the source of income. However, if you have concerns about drawing attention, you can provide more specific details such as the name of the casino and the date.

After inputting the information onto your Schedule 1, you must transfer the same total to line 7a of your standard tax return. Subsequently, you can include the winnings in your total taxable income.

Can you deduct gambling losses on your taxes?

In a rare occurrence, the Michigan legislature swiftly took action for the benefit of the people towards the end of 2021.

You now have the opportunity to deduct your gambling losses on your state tax return, thanks to a bill that was passed and signed last December. It is worth mentioning that this provision already existed for your federal return.

When filing your federal tax return, you have the option to complete a Schedule A form to itemize deductions. Within this form, gambling losses can be reported in Box 16, categorized as Other Itemized Deductions.

There are two important points to consider in this matter: 1. It is not permissible to declare losses exceeding the amount of claimed winnings. 2. It is essential to provide evidence for all of these losses.

Even if online apps fail to provide you with a tax document, they often maintain a record of your wins and losses, allowing you to retrospectively review your performance.

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