How Do Gambling Taxes Work in Michigan?

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In-person casino gambling was first introduced in Michigan way back in November 1996 when Michigan voters approved Proposal E. The measure allowed three licensed casinos to be built in Detroit. Later, Proposal E was signed into law as the Michigan Gaming Control & Revenue Act. 

Before that, casinos and gambling-related activities were reserved for tribal lands in the state. In 1993, Michigan state Governor John Engler signed compacts with the seven federally recognized tribes in the state, legally allowing them to conduct Class III gaming on Indian lands as long as they were compliant with the IGRA or Indian Gaming Regulatory Act. 

Online casinos, gambling, and sports wagering didn’t come to the state until January 22nd, 2021. 

As with any other state in the US with legal in-person gambling, bingo, lotteries, online gaming, or sports wagering, taxes exist. Michigan is no different. 

Since beginning online casino gambling in the Great Lake State, online operators have generated over $1.03 billion in taxes for local and state governments. Online sports wagering has generated $52.94 million in tax revenue since it went live on January 22nd, 2021. 

Of course, taxing just the casino corporations doesn’t cut it for Uncle Sam. Michigan residents who participate in any form of legal wagering in Michigan are taxed on their winnings. 

The amount you’re taxed is dependent on a variety of factors and can change based on where you are located.

Casino winnings are subject to federal, state, and even local taxes in certain scenarios. 

On the federal side, winnings are treated as normal income. If taxpayers itemize deductions, losses can be taken out from any winnings with a Form 1040. The IRS website states, “If you have won more than $5,000, the payer may be required to withhold 28% of the proceeds for Federal income tax. However, if you did not provide your Social Security number to the payer, the amount withheld will be 31%.”

We’ll talk more about Michigan specifically in this blog. While are not tax professionals here at playonlinemichigan.com, we wanted to create a resource that provides a basic understanding of gambling taxes. 

When and How Am I Taxed?

In most situations, individuals are given their complete winnings up front and receive a Form W-2G at the end of the tax year. There are some instances, for example, if you win a large sum at a physical casino, where they will remove any taxes before you leave.

In the state of Michigan, there is a 4.25% tax rate for everybody on gambling winnings. According to the Michigan.gov website gambling winnings are “included in your adjusted gross income.” 

Local Taxes

The last form of taxes you may encounter are local taxes imposed by cities on gambling winnings. There are at least 24 cities that charge this form of income tax in Michigan.

The following municipalities have a 1% local income tax:

Albion, Battle Creek, Benton Harbor, Big Rapids, East Lansing, Flint, Grayling, Hamtramck, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Springfield, and Walker

Grand Rapids and Saginaw have a 1.5% income tax rate. Highland Park and Detroit have the highest income tax rates in the state, with 2% and 2.4%, respectively. 

*Disclaimer*

playonlinemichigan.com does not provide tax, legal, or accounting advice. This blog was prepared for informational purposes only and should not be relied on for tax, legal, or accounting advice. You should consult your own advisors before engaging in any gambling activity or making tax preparations. 

Mac Daniel is a writer for PlayOnlineCasino and PlayOnlineSportsBetting. He has experience writing about a wide variety of topics, including healthcare, tourism, non-profit organizations, and most recently casino and sportsbetting news. To check out more of his work, visit: playonlinemichigan.com