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 comprehensive guide to understandingšø 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 use to estimate how much youāll be taxź¦”ed.
Michigan Sports Betting Taxes in Numbers
Despite being a relatively late entrant to the legalization of ināternet 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 amassed just under $1bn in lifetime tax revenšue.
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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, meaningš¦ your total amount won minus any šnoted losses incurred during the tax year in question. Youāre responsible for maintaining a precise record of your wins and losses at land-based casinos for your tax reports.
Itās the 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 šthe winnings and any federal taxes withheld.
Moreover, there are also federal iź©µncome 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.
Aš¦ll online bookies must issue a W-2G form to those who win $600 or more and at least 300 times 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 froį©į©į©į©į©į©ā¤ā¤ā¤ā¤į©ā¤ā¤ā¤ā¤į©ā¤ā¤ā¤ā¤į©š±į©į©į©m the lottery are also subject to federal, state, and local taxation.
Here are some key points:
The Michigan Lottery does not withhold taxesź¦ on prizes $600 or lą¼ŗower.
Lšottery winnings/prizes in excess of $600 are categorized as income, so a W-2G form is required for your tax filings.
Michigšan does not withhold taxes on winnings from $601 to $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 24ā% for federal income tax. Prizes of this size are aš¼lso subject to automatic withholdings at both state and federal tax levels. 4.25% is withheld for Michigan state tax
The Purpose of Michigan Sports Betting Taxes
Taxes will remain a source of contention wherever you are, but they can prove beneficial if the money generated is used in the right waļ·½y.
Michiganās šlow 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 revenue can be directed and used for multiple ventures, with the taxes collected by online and land-based bookmakers/casinos goļ·ŗing 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 healthcareā± in Michigan, 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 a W-2G fšorm, where they need to detail their winnings. The IRS also receive a copy.
Here ašre the thresholds for receiving a W-2G form:
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Winning $1,200 or more from slot machines or bingāo
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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 tournš ament (less the buy-in amountš)
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Winning $600 or more from an event like horse racing if the payout was at least 300x the wager amź¦ount
Casinos are not liable to hand out forms 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 ofš your federal tax return.
Michigan Sports Betting Taxes
Michiganšās taxation structure can be divided into three levels: individual, brand, and state. Herź¦eās a breakdown of all three:
Individual State Taxes
Individuals are obāliged to pay a 4.25% statāe 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 individualās income and tax bracket.
Rules for Brands
Casinos and sportsbooks are also responsible 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, šMotorCity 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, thāese three casinos generated over $250 million in tax revenue.
ą¼ Obtaining an internet gaming operator licence costs $100,000, with the application itself costing $50,000. The annual fee to continuš§e 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, theź©²re 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%, and Grand Rapids and Saginaw is 1.5%. Others, including Albion, Jackson, Flint, and Hudson, all have a rate of 1%.
Michigan is able to generate masses in gambling tax via inš dividual winnings and licensing fź¦æees.
ThePuntersPage Final Say
Paying tax on your gambling winnings can be seen as a distinct inconvenience. However, Michiganās 4.25% flat tax rate is fairly kind compared to other states, and taxpayers can take some solace in knowing that a chunk of their income išs going towards improving local areas and surrounding communities.
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FAQs
Yes, šbut only your winnings. Stakes are not taxed.
Any winnš„ings earnšed from gambling promotions are taxable.
The Michigan 4.25% state tax is low compared to other US states. Cities in this state also impšose local income taxes, which vary from 1% to 2.4%.
You can, but only if you itemize your deductions on your taxes. Youāre only allowed to deduct losses equal to your winninš±gs. You can always check official for more information about standard deduction and itemized deductions.
You will likely be penalized financially if you're caught not reportingšÆ 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 declašring your winnings 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, yoāuāre then required to declare your winnings on your home stateās tax return. This will often be at Michiganās 4.25% rate.