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 donāt get to keep all of their winnings. Here's a comprehšensive guide to understanding 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 āgaming tax calculatorā, which you can usešÆ to estimate how much youāll be taxed.
Michigan Sports Betting Taxes in Numbers
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 annuaš l tax revenue, as of August 2023ź§, 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 Michiganās 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. Youāre responsible āfor maintaining a precise record of your wins and losses at land-based casinos for your tax reportsą¼.
Itās thšÆe casinoās responsibility to issue a W-2G tax form to those who win $600 or more, and at least 300 times the wager amount ā which indicates the winnings and any fš¦ederal taxes withheld.
Mošreover, there are also federal income tax rates (dependent on an individualās total income and tax bracket) to consider. These differ from Michiganās 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 Michiganās 4.25% state tax, and this includes winnings from welcome offers, which are common among online bookmakers.
All online bookies must issue a W-2G form to those who win $600 or more and at least 300 tšimš³es the wager amount. However, youāre responsible for your own bookkeeping of your total winnings.
Lottery Winnings
The Michigan State Lottery is laden with games and promotions, and any winnings šfrom the lottery are also subject to federal, state, and local taxation.
Here are some key points:
The Michiganā Lottery does not withhold taxes on prizes $60ź§0 or lower.
Lottery winnings/prizes in excess of $600 are categorized as income, so a W-2G form išs required for your tax filings.
Michigan does not withhold taxes on winnings from $601 to $5,000, but yā¤ou must report these funds to the Internal Revenue Serviź§ce and the 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 withholdings at both state and federal tax levels. 4.25% iš«s withheld for Michigan state tax
The Purpose of Michigan Sports Betting Taxes
Taxes will ź¦remain a source of contention wherever you are, but theyš can prove beneficial if the money generated is used in the right way.
Michiganās low tax rate means the state doesnāt collect as much in gambling taxes compared to other states, but the money earned can nonetheless go towards the improvement of local communities. The revā¤enue can be directed and used for multiple ventures, with the taxes collected by online and laš¦©nd-based bookmakers/casinos going towards the stateās general fund.
These funds can then facilitate the improvement of public services and infrastructure, potentially aiding the development of initiatives regarding education and healthcare in šÆMichigan, too. For example, of their Adjusted Gross Receipts directly to the School Aid Fund.
In Detroit, the stateās 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 aą¹ W-2G form, where they need to detail their winnings. Theš¹ IRS also receive a copy.
Here are the ź©²thresholds for receiving a W-2G forź§m:
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Winning $1,200 oź¦r 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 š§øtournament (less the buy-in amount)
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Winning $600 or more from an event like horse racing if the payout was at leastš¦© 30š0x the wager amount
Casinos are not liable to hand out forź©µms for minor wins, so itās 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.
Michigan Sports Betting Taxes
š Michiganās taxation structure can be divided into three levels: individual, brašØnd, and state. Hereās a breakdown of all three:
Individual State Taxes
Individuals are obliged to 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 tšax š °rate is dependent on an individualās income and tax bracket.
Rules for Brands
Casinos and sportsbooks are also responš¤Ŗsible for paying taxes and licensing fees to operate in Michigan. The size of their tax depends on the casinoās 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 $50,000. Theą“ annuaš§øl 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 Michiganās 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. Detroitās local tax is 2.4%, Highland Parkās is 2%, aānd Grand Rapids and Saginaw is 1.5%. Others, including Albion, Jackson, Flint, and Hudson, all have a rate of 1%.
Michigaān is able to generate masses in gambling tax via individual winnings and licensing fees.
ThePuntersPage Final Say
Paying tax on your gambling winnings can be seen as a distiānct inconvenience. However, Michiganās 4.25% flat tax rate is fairly kind compared to other states, and taxpayers can take some solace in knowinš§g that a chunk of their income is going towards improving local areas and surrounding communities.
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FAQs
Yes, but only your winnings. Stakes are not štaxed.
Any winnings earned from gambling promotions are taxabš¶lā±e.
The Michigan 4.25% state tax is low compared to other US states. Cities in this staš²te also impose local income taxes, which varāy from 1% to 2.4%.
You can, but only if you itemize your deducšøtions on your tź¦Æaxes. Youāre 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 š¦¹penalized 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 ā and the one you use when declaring your winnings ā is the W-2G form distributed by ź§casinos. The 1099-MISC fšŖorm is also common.
Yes, if you win money while on a visit to the state, youārš°e then required to declare your winnings on your home stateās tax return. This will often be at Michiganās 4.25% rate.