Michigan, the 20th US state to legalize sšports 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 understanding and navigaš¦ting 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 estimź¦ate 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. Initāially projected to yield $19 million in annual tax revenue, as of August 2023, 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 for maintaining a precise record of your wins and ź¦Ælosses at land-based casinos for your tax reą¼ports.
Itās the casinoās responsibility to issue a W-2G tax form to ź¦those who win $600 or more, and at least 300 times the š wager amount ā which indicates the winnings and any federal taxes withheld.
Moreover, there are also šfederal income tax rates (dependent on an individualās total income and tax bracket) to consą¶£ider. 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 bookāies must issue a W-2G form to those who win $600 or more and at least 300 times the ą¹wager 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 from the lottery are also suābject to federal, state, and local taxation.
Here are some key points:
The Michigą¹an Lottery does not withhold taxes on prizes $600 or lower.
Lottery winningšs/prizes in excź§ess of $600 are categorized as income, so a W-2G form is required for your tax filings.
Michigan does not withź¦Æhold taxes on winnings from $601 tš”o $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 24% for federal income tax. Prizes of this size are also subject to automatic withholdings at both state and federal tax levels. 4.25% is withheld for Michigan sš²tate tax
The Purpose of Michigan Sports Betting Taxes
Taxes will remainš a source of contention wherever you are, but they can prove beneficial if the mšoney 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 revenue can be directed and uš„sed for multiple ventures, with the taxes collected by online and land-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 oš°f initiatives regarding education and healthcare 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 form, where they need to detail their winnings. The IRSš„ also receive a copy.
Here are the thresą²holds for receiving a W-2G form:
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Winninšg $1,200 or 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 touršnament šø(less the buy-in amount)
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Winning $600 or more from an event lš§ike horse racing if the payout was at least 300x the wager amouš®nt
Casinos are not liable to hand out forms for minor wins, so itās your responsibility to keep up to date with all your gamblingā winnings to ensure you can accurately declare them as part of your federal tax return.
Michigan Sports Betting Taxes
Michiganās taxation structure can be divided into threeš¬ levels: individual, brand, and state. Hereās a breakdown of all three:
Individual State Taxes
Individuals are obliged to pay a 4.25% stašte 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 reveną¶£ue 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 cosź¦ting $50,000. The annual 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 $š2,500 each year thereafter.
State Tax Information
As well as Michiganās flat 4.š§25% tax rate, there are also city taxes to consider. 24 citiš¤”es 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 maļ·½sses in gambling tax via individual winnings and licensing fees.
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 incź¦«ome is going towards improving local areas and surrounding communities.
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FAQs
Yes, but only your winnings. Stakes are not taxedšŗ.
Any winnings earned from gambling promotions arą¼e taš«xable.
The Michigan 4.25% statše tax is low compared to other US states. Cities in this state also impose 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 winnings. You can always check official for more information about standard deduction and iteą± mized deductions.
You will likely be penalized financially if you're caught not reporting your winnings to the IRS. šPenalties vary depending on the amount of uš²nreported state and federal taxes.
There are multiple tax forms, but š¦©the most common for sports bettors ā and the one you use when declaring your winnings ā is the W-2G form distributed by caź§sinos. The 1099-MISC form is also common.
Yes, if you win money while on a āvisit to the state, youāre then required to declare your winnings on your home stateās tax return. This will often be at Michigāanās 4.25% rate.