Michigan Gambling Winning Taxes
@B_DEROUIN
October 22nd, 2023 - 06:42pm
@B_DEROUIN
As Michigan becomes one of the fastest-growing gambling markets in the U.S. with legal sports betting, online gambling and more, bettors have more opportunities to cash winning tickets and earn profits at the state’s sportsbooks and gaming and poker tables. Whether hitting a jackpot or taking home a modest return, paying taxes on those winnings is part of the experience.
All gambling income — whether you play at land-based Detroit casinos, tribal casinos or on the state’s online casino sites (which are preparing to go live) — is subject to tax and should be reported on your federal and Michigan income tax returns. This page answers general questions about how gambling winnings are taxed in Michigan. Tax issues can be complex, so it’s advisable to consult a tax professional or financial advisor to avoid potential mistakes.
Michigan Gambling Tax Calculator
Tax rates depend on your annual income and tax bracket. Gambling income is subject to state and federal taxes but not FICA taxes, and the rate will depend on your total taxable income (not just wages) minus deductions (standard or itemized).INSERT TAX CALCULATOR
Marginal tax rate is the bracket your income falls into. Effective tax rate is the actual percentage you pay after standard deductions, etc., and operate on a sliding scale depending on filing status and total taxable income. The state tax rate in Michigan is 4.25%, which is the rate your gambling winnings are taxed.
When gambling winnings are combined with your annual income, it could move you into a higher tax bracket, so it’s important to be aware of gambling income before starting tax preparation.
Are Gambling Winnings Taxable in Michigan?
Yes, any and all gambling winnings are considered taxable. That includes winnings from casino games, slots, poker, sports betting, pari-mutuel racing and the Michigan Lottery.
Depending on the amount of your winnings, your casino, sportsbook or pari-mutuel wagering provider may have already withheld federal and state tax, which is indicated in a W-2G form mailed to you. Even if you didn’t receive a W-2G form and no tax was withheld, it is your responsibility to report all gambling winnings on your tax returns.
And to be clear, this apples to all online gaming, too, including online poker and casino games, and online sports betting.
What are the Gambling Tax Rates in Michigan?
Gambling winnings are subject to a 24% withholding for federal tax, though the actual amount you owe on your gambling win will depend on your total income. That tax is automatically withheld on winnings that reach a specific threshold (see below for exact amounts).
In addition, Michigan assesses a 4.25% state tax on income, which includes gambling winnings
How to Claim and Report Michigan Gambling Winnings for Taxes
Depending on the amount of winnings, bettors may receive a W-2G form, which is sent by the payor (casino, pari-mutuel operator, sportsbook, online casino, online sportsbook, etc). The form reveals the amount of winnings and if any tax was withheld. A copy of that W-2G is sent to the Internal Revenue Service.
Expect to receive a W-2G form if your gambling winnings exceeded any of these thresholds the previous calendar year:
- $1,200 or more from slot machines or bingo.
- $1,500 or more from a keno game.
- More than $5,000 from poker tournaments (reduced by buy-in amount).
- $600 or more from any pari-mutuel event (horse racing, etc.), provided the payout was at least 300 times the wager amount.
Casinos are not required to issue a W-2G for winnings for table games (blackjack, roulette, craps, etc.), though the IRS expects players to keep track of their wins and losses.
If your winnings were non-cash prizes, such as an automobile or vacation trip, the IRS instructs you to report the fair market value of each prize.
Non-residents with winnings at Michigan casinos or racetracks are still subject to Michigan state tax.
What to Do if You Don’t Receive a Form W-2G in Michigan
You will not receive Form W-2G if your gambling winnings did not meet the automatic withholding threshold. But be aware that your gambling winnings are still considered taxable income.
Without a W-2G, how do you know the amount of your winnings and losses?
The IRS expects you to keep an accurate record or diary of all betting activity and may require you to substantiate wins and losses with records and receipts. If your wagers were placed online, your sportsbook, casino or pari-mutuel provider should have a complete record of all your bets during the previous calendar year that can be easily accessed.
Is There Any Way I Can Deduct My Losses?
Yes there is. But …
- You can deduct gambling losses only if you itemize on your tax return. That means the roughly 90% or taxpayers who take the standard deduction cannot deduct gambling losses.
- If you itemize (use Schedule A), gambling losses cannot exceed winnings in any given year. So if you had $4,000 in winnings and $10,000 in losses last year, your deduction would be limited to $4,000. The remaining $6,000 cannot be carried over.
The IRS may request that you substantiate gambling wins and losses. This is where accurate record-keeping becomes so important.
Your documentation may include:
- Form(s) W-2G.
- Form 5754 (group gambling winnings)
- Wagering tickets with dates, location and amounts won/lost. Also provide names of anyone who gambled with you, if applicable.
- Canceled checks or credit records.
- Financial and bank statements.
Michigan Lottery Taxes
Michigan Lottery winnings are subject to federal, state and local income taxes. Here’s what you need to know:
- The Michigan Lottery does not withhold any taxes on prizes of $600 and below.
- Winners of individual prizes of more than $600 will receive a W-2G form. The Michigan Lottery does not withhold any taxes on lottery prizes from $601 to $5,000, but is required to report the winnings to the IRS and Michigan Department of Treasury.
- Winnings of more than $5,000 are subject to automatic withholding of 24% federal tax and 4.25% state tax. The Michigan Lottery says the withholdings are estimates and do not necessarily satisfy a winner’s tax liability. This applies to both state and non-Michigan residents.
How are Group Lottery Wins Taxed in Michigan?
A group that wins the Michigan Lottery must submit Form 5754 or a substitute 5754 form, either in print or electronically. All members must provide their Social Security number, photo identification and sign the form.
One person in the group will be designated as the primary winner. A check and W-2G form will be mailed to each member of the group. Federal and state taxes will be deducted from the checks, if applicable.
Taxes on Multi-State Lottery Wins
The same tax liability applies, whether you win a Michigan Lottery game or multi-state lotteries such as Powerball or Mega Millions. That means 24% in federal taxes and 4.25% in Michigan taxes, whether the prize is claimed in a lump sum or 30-year annuity.
If I Don’t Report My Gambling Winnings, What Happens?
Your tax bill could become more expensive if the IRS decides to add penalties and interest.
If you received a W-2G form detailing your gambling winnings, so did the IRS, which is obviously aware of that income. If your winnings did not meet the W-2G threshold, the IRS may not be aware, but the agency maintains that taxpayers are legally obligated to report all gambling income.
Contributors
Bryce Derouin
Reviewer since August 2023
With a decade in the media and gambling space in Michigan, I aim to bring you the latest news and developments in Michigan online casino and sports betting.
