HomeMichigan Gambling Taxes

Michigan gambling taxes

Winning money while gambling on Michigan online casinos or sports betting apps is a fun endeavor, but tax time can slightly sour the overall sweetness of hitting it big. We’ve put together this page to help you with our Michigan gambling taxes calculator and provided some other information to help you with the filing process.

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Do I have to pay tax on gambling in Michigan?

Yes, you do have to pay tax on gambling in Michigan. Your gambling winnings are taxable income at the state and federal levels.

Michigan sportsbooks, casinos, and their online counterparts are all subject to taxation as well. As of April 2024, online gambling activities have generated more than $1.3B in tax dollars for Michigan’s state and local governments.

What are the tax rates for gambling in MI?

The tax rate for gambling for individuals in MI is a flat 4.25% rate across all tax brackets. This is in line with the state’s 4.25% income tax rate.

You may also be able to deduct some of your gambling losses when filing your returns. Under Senate Bill 764, which was signed into law by Gov. Gretchen Whitmer in 2021, if you end the year with a net loss on gambling winnings, you can deduct the losses from your return.

However, you can only do this if you are itemizing your deductions rather than taking the standard deduction.

Betting operators are taxed at 8.4% rate on their adjusted gross gambling receipts. This percentage is broken up among the State (which receives 3.78 percent of the tax) and the City of Detroit (which receives 4.62 percent).

Steps to take to file taxes for Michigan gambling winnings

The following steps will help you to file taxes for Michigan gambling winnings. If you’re still concerned you’ve not done things correctly, we highly recommend consulting with a tax professional, as they can guide you through the process in ways we cannot.

  1. Calculate your wins and losses for the year: In some cases, you’ll receive a W-2G tax form from the gambling operators you were using. However, you should still keep accurate records throughout the year of how much you’re spending and how much you’re winning. Determine the total you won and subtract the amount you lost. This is the taxable amount for your Michigan returns.
  2. Add your net total to your tax form: Next, it’s helpful to complete your federal form before filling out the state form, as your federal return will allow you to calculate your adjusted gross income. In Michigan, the state tax return form is Form MI-1040 (it will look very similar to the Federal 1040 form), unless you are itemizing your returns, in which case you can include the deduction in the "Alimony and other taxable income" on the MI-1040CR, MI-1040CR-2, or MI-1040CR-7.
  3. File your returns: Finally, you’ll need to submit all the tax paperwork for your returns. If you’re using a tax preparation software service, make sure to print out an extra copy for your own records. Taxes are due on April 15 if you’re filing annually.

What could happen to me if I don’t report my gambling winnings in Michigan?

If you don’t report your gambling winnings in Michigan, a range of consequences could happen to you. The magnitude of the penalties will depend on the amount of money you failed to report.

First, the amount of money you underpay will be subject to compounding interest until the balance is paid in full. These penalties can rack up quickly and result in costs that far exceed the amount you underreported.

Next, you could be fined as much as $5,000 for each infraction. These fines are on top of the existing penalties you would still owe.

Finally, you could be subject to jail time. Sentencing guidelines allow for up to five years per infraction, and incarceration could be a supplemental penalty to the fines listed above.

All this to say, pay your taxes correctly!!

History of gambling tax laws in Michigan

Here is a brief history of the gambling tax laws in Michigan.

  • 1933: The Racing Act of 1933 is passed in Michigan, allowing the state to regulate pari-mutuel horse racing.
  • 1972: Michigan voters approve Public Act 239, establishing a state lottery to help fund the state’s public school system. Also in 1972, Michigan passed Act 382 to authorize charitable gambling.
  • 1993: Michigan’s first tribal casino is opened by the Saginaw Chippewa Indian Tribe in Mt. Pleasant.
  • 1998: Tribal gaming compacts are revised to require the tribes to pay 8% of net wins on electronic games to the State and 2% of net wins to local municipalities.
  • 2019: Michigan legalizes online sports betting and online casino gaming. Those industries launched in January 2021.
  • 2021: Governor Gretchen Whitmer approves Senate Bill 764, allowing gamblers to deduct their net losses from tax returns.

FAQ

What if I'm a professional gambler—how are my earnings taxed differently?

If you are a professional gambler, your earnings are taxed differently than if you are a casual bettor. Specifically, the difference lies in professional gambling losses being considered “a component of the professional gambler’s trade or business income.”

Are there any recent changes to gambling tax laws in Michigan that I should be aware of?

No, there are no recent changes to gambling tax laws in Michigan that you should be aware of. However, if changes do occur in the future, we will update this section accordingly.

What are the best practices for managing tax obligations for frequent gamblers in Michigan?

The best practice for managing tax obligations for frequent gamblers in Michigan is to keep accurate, detailed records of where you’re betting, how much you’re gambling, and your net wins and losses. While you may receive supplemental tax forms if you’re a regular, having these notes will be critical in case you are audited.

Where can I find more information or get help with gambling tax issues in Michigan?

If you need more information or assistance with gambling tax issues in Michigan, start by going to Michigan.gov/taxes and see if you can find what you’re looking for there. If not, we highly recommend reaching out to a local tax professional or other service that can point you in the right direction.