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Michigan Gambling Taxes

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You will be required to pay tax on any gambling winnings earned in Michigan. The Great Lakes State imposes a flat 4.25% income tax, and Michiganders must also pay federal income tax on their gambling profits.

This guide explains how to declare your gambling winnings when filing your IRS return and your state tax return. You will also learn how to deduct any gambling losses from your winnings, which can potentially reduce or eliminate your tax liabilities.

How to pay federal taxes on gambling in Michigan

The IRS deems gambling profits to be taxable income. Your winnings will be added to any other income that you earned over the course of the year, such as your salary, bonuses, dividends, and capital gains.

Your total income and your marital status will then dictate the federal income tax rate you pay. These are the current brackets:

RateSingleMarried Filing JointlyMarried Filing SeparatelyHead of Household
10%$0 – $11,600$0 – $23,200$0 – $11,600$0 – $16,550
12%$11,600 – $47,150$23,200 – $94,300$11,600 – $47,150$16,550 – $63,100
22%$47,150 – $100,525$94,300 – $201,050$47,150 – $100,525$63,100 – $100,500
24%$100,525 – $191,950$201,050 – $383,900$100,525 – $191,950$100,500 – $191,950
32%$191,950 – $243,725$383,900 – $487,450$191,950 – $243,725$191,950 – $243,700
35%$243,725 – $609,350$487,450 – $731,200$231,251 – $365,600$243,700 – $609,350
37%$609,350+$731,200+$365,600+$609,350+

If you win a reasonably large sum, the payer (such as a casino, lottery, or sportsbook) is instructed to take a 24% withholding tax. For example, if you win $100,000, the payer should hold $24,000 back for federal taxes.

However, the exact thresholds for what constitutes a “large sum” vary according to the activity in which you scored your win, as follows:

  • $1,200 or more (not reduced by your bet amount) from slot machines or bingo
  • $1,500 or more (reduced by your wager amount) from keno
  • $5,000 or more (reduced by the wager or buy-in) from a poker tournament
  • $5,000 or more from lotteries, sweepstakes, or betting pools
  • $600 or more from other types of gambling if the amount is at least 300 times the wager

The 24% is merely an estimate of the amount you will owe. You may get some or all of it back after you file your IRS return, or you may owe more.

When tax is withheld, the payer should provide you with a Form W-2G, which highlights the amount you have paid. A copy of the form will also be sent to the IRS.

Steps to take when you file

Follow the steps listed below to declare your gambling winnings when you file your IRS return each year:

  • Head to line 21 on Form 1040. There is an “Other Income” section on Schedule 1.
  • Provide details of any gambling winnings you earned that year. Make a note of any tax that was withheld too.
  • Attach copies of any Form W-2G documents received. That will make it easy for the IRS to see the withholding tax you have paid.
  • If you plan on deducting your gambling losses from your winnings, go down to line 27, Schedule A (Form 1040).
  • Carefully itemize your wins and losses, and provide copies of any statements, tickets, or journals that back up your claims.

We have provided more information on deducting gambling losses in our FAQ section.

How to pay state taxes on MI gambling winnings

Michigan law imposes a flat 4.25% income tax on all residents. That applies to any gambling profits earned (including sweeps casino taxes) along with other sources of income, such as your wages and bonuses.

The payer is supposed to withhold 4.25% of your gambling winnings for state income tax purposes in Michigan. For example, if you win $10,000 at a casino, the payer should withhold $2,400 for federal income tax and $425 for state income tax, so you will be paid the remaining $7,175.

You should also receive a 1099 form, which is the state equivalent of the federal Form W-2G, when tax is withheld.

How to file

Michigan’s starting point for determining your taxable income is your federal adjusted gross income. That means you will have already done most of the work when compiling your federal income tax return.

Download Form MI-1040. On line 10, enter your adjusted gross income from your federal Form 1040. That gross income will include any gambling winnings you earned.

You can deduct gambling losses from your winnings before paying state income tax. To do so, you need to have itemized deductions for gambling losses on your federal income tax return.

Just include a copy of your U.S. Form 1040 Schedule 1 and U.S. Form 1040 Schedule A to report the wagering losses you deducted to the state of Michigan.

If you have paid any state withholding tax, fill out a Michigan Withholding Tax Schedule Form, which you can file alongside Form MI-1040. You do not need to attach any 1099 forms you received, but you can use them to fill out the form.

You can also exclude the first $300 won from gambling from total household resources. Just include your winnings on the “Alimony and other taxable income” section on the MI-1040CR, MI-1040CR-2, or MI-1040CR-7 forms.

Michigan players also found these pages helpful

Are lottery winnings taxable?

Yes, lottery winnings are taxable in Michigan. Once again, you will need to pay a flat 4.25% state income tax and a graduated federal income tax.

You can deduct the price of your lottery ticket from your winnings. Players can also deduct any other gambling losses from lottery winnings.

Your profits from the lottery will then be added to any other income that you earned that year, and you will pay tax accordingly.

The Michigan Lottery or the Multi-State Lottery Association will withhold tax if you win more than $5,000. Once again, you may get some of it back when you file your IRS and state tax returns, or you may end up owing more.

What if I win a lottery prize as part of a group?

You can fill out Form 5754 if you win a lottery prize as part of a group. That will allow the Michigan Lottery or the Multi-State Lottery Association to prepare a Form W-2G for each member of the group.

Withholding tax will be taken, and you can attach the Form W-2G when filing your federal income tax return. You may need to pay more if you end up in a high income tax bracket, or you may get some of it back.

MI gambling tax FAQ

Yes, Michiganders can deduct any gambling losses sustained from your winnings. That means you will only need to pay tax if you end the year in profit from all gambling activities.

If you intend to deduct your losses, you will need to provide an itemized record on Schedule A (Form 1040). You must also provide supporting evidence to substantiate your claims. Here are some examples of the supporting documents you can provide:

  • A meticulous journal that logs your wins and losses.
  • Your gambling history or payment history at an online casino or sportsbook.
  • Bank statements, credit card statements, or e-wallet statements.
  • Losing wagering tickets or lottery tickets.

You can only use gambling losses to reduce gambling winnings. They cannot be deducted from any other income earned, such as your salary or bonuses. In the words of the state of Michigan: your losses “cannot reduce taxable gambling winnings below zero.”

If you don’t get a Form-W2G, or you lose the one you received, you can simply contact the MI online casino and ask for a replacement copy. Alternatively, you can ask the IRS to send you a copy, as the IRS will always receive a duplicate of each Form-W2G you are issued with.

The government will automatically be informed of any substantial gambling wins you earn, as it will receive a Form-W2G. When you play at online casinos, poker rooms, and sportsbooks, you also leave a digital record of your transactions, so it is unwise to conceal your winnings.

You also run the risk of being audited if your lifestyle exceeds your reported income. For example, if you declare a modest income and splash out on sports cars and luxury vacations, the IRS may open an investigation into your gambling activities.

The state of Michigan will impose a 5% penalty on the total unpaid tax due. That applies for the first two months, and the 5% rate will then be assessed each month. The maximum late penalty is equal to 25% of the unpaid tax owed.

Meanwhile, the IRS will charge you interest on overdue income tax. The rate is 3% above the federal short-term interest rate. If the rate is 5.25%, you will need to pay 8.25% interest. The IRS can also charge an additional 0.5% failure to pay penalty each month.

It can also file a lien against your assets to secure payment of your tax debt. The final step is a levy, which allows the IRS to seize your property in order to pay your tax debt.

Written by
Martin Green
Fact checked by
Bart Shirley
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