Michigan Online Gambling Legality and Taxes
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The state of Michigan is open to all forms of online gambling. It's home to some of the USA’s top online casinos, sportsbooks, and poker rooms. Their services are open to anyone over 21, and the Michigan Gaming Control Board (MGCB) oversees all activity. The organization licenses and regulates gambling providers and ensures customers can gamble safely.
Other areas the MCGB oversees include setting tax rates for agencies to collect tax revenues for local initiatives such as the school aid fund and other community projects. They have strict rules outlining who can set up online services. MI gambling sites must partner with a local establishment to acquire licensing. The MCGB audits each platform, ensuring they comply with regulations and provide responsible gambling measures, fair casino gambling, and an easy path for complaints.
This page examines Michigan online gambling legality and taxes and how to follow them. Readers can learn where to gamble online, how to report gambling winnings, itemize deductions, and other helpful tips to stay within the law and pay gambling taxes.
Where Can I Legally Gamble Online in Michigan?
After passing the Lawful Internet Gambling Act (2019), many national gambling brands partnered with a retail venue and acquired a state license to set up online operations in MI. These sites operate legally and are responsible for contributing tax revenue to state and federal agencies.
- Online Casinos: Michigan online casinos are open to the public, and you can win real money playing Bingo, Online Slot Machines, Jackpots, Live Dealers, and Table Games. The top-rated casinos pay out huge prizes, and popular choices include Caesars Palace, BetRivers, and Golden Nugget.
- Online Sportsbooks: You can wager at the best US sportsbooks, including BetMGM, DraftKings, and Fanduel. They provide betting odds on many sports and accept outright, pre-match, and live online sports bets.
- Online Poker: Michigan joined the Multistate Internet Gaming Agreement in 2022, allowing gameplay against other states. Players can win money playing cash tables, sit & go's, and multi-table Michigan online poker tournaments on BetMGM, Poker Stars, and WSOP. Tables like online blackjack Michigan variants, and online roulette Michigan games are also available.
- Lottery: The Michigan Lottery permits legal lottery and keno games. They also provide access to big interstate lotteries such as Mega Millions and Powerball.
- Daily Fantasy Sports: The Fantasy Contests Consumer Protection Act passed in 2019, allowing sites like FanDuel and DraftKings to provide legal DFS services.
Are There Any Responsible Gambling Measures in Place?
One of the critical areas the MCGB contributes is enforcing responsible gambling measures. These rules outline specific requirements for any new Michigan online casino that joins the market to protect anyone with a gambling problem. The measures include account limit options so you can restrict how much they can deposit or wager in a particular period.
The sites must also make it easy to self-exclude, close the account, or file a complaint against the operator. They also include links to external organizations for anyone seeking help with a gambling problem. Some organizations they link to include GamAnon, Gamblers Anonymous, the National Council on Problem Gambling, and the Michigan Department of Health and Human Services.
Are Gambling Winnings Taxable in Michigan?
Under state law, Michigan gambling winnings are taxable, and you must report your gambling income in your state income tax return. It applies to all activities, so any gambling wins at an online casino, Michigan online casino app, sportsbook, poker room, or the lottery are subject to additional income tax. In addition to the Michigan state tax rates, you must report this activity in your federal income return and pay taxes to the IRS.
What is The Tax Rate for Online Gambling in MI?
All online gambling winnings in Michigan are subject to the state’s new personal income tax bracket of 4.05%. The 4.05% is added to the 24% federal tax rate, bringing the total amount payable to 28.05%. If you win over the threshold, the operator provides a W-2G form, and they may automatically hold state and federal taxes.
How to Report Michigan Gambling Winnings
We've prepared a step-by-step guide to help you navigate the tricky tax season. Anyone who wins a certain amount online in Michigan should receive a W-2G form showing all gambling activities and taxes withheld. Gambling winnings over the amounts below are subject to withholding tax rates:
- Bingo and Michigan Online Slots: $1,200
- Keno: $1,500
- Poker: $5,000
- Horse Racing, Sports Betting, Lottery: $600 or 300x
Michigan residents must report their online gambling winnings to the IRS and the MDT. We’ve outlined the steps to complete this below. Remember to seek help from a tax professional if the process is overwhelming.
- You should receive a W-2G form from your gambling provider. It details your activity for the year, making it easy to see the tax withheld, total gambling winnings, wagering losses, and how much you should report and pay tax on.
- Visit the IRS website and download Form 1040 (Individual Income Tax Return), Schedule 1 - Form 1040 (Additional Income and Adjustments), and Schedule A - Form 1040 (Itemized Deductions).
- Fill in the main 1040 form with your personal information and yearly income. If the gambling site withheld any tax, they will list the amount in the W2-G form. Add this amount to the Federal Income Tax Withheld field.
- On the Schedule 1 form, enter your total gambling winnings under Other Income on Line 8b.
- If you plan to deduct gambling losses, you must not choose the Standard Deduction, select to itemize deductions and complete the Schedule A form. You can only deduct losses up to your total win amount.
- You can report your Michigan gambling winnings in the Michigan tax return to the MI Department of Treasury. Use their online system or download and complete form MI-1040 (Individual Income Tax Return).
- Always seek advice from a tax professional if you require assistance to pay taxes.
What If I Don't Receive a W2-G?
Suppose you grabbed that Michigan online casino bonus or Michigan online casino no deposit bonus and won big from online gambling, it's considered taxable income, and you must receive a W2-G form to file your taxes.. It’s part of the regulations; they must send you and the Internal Revenue Service a copy to comply.
If you fail to receive one, you should contact the business to request another one. Alternatively, you could manually review the account history to see activity over the last year and determine the total gambling winnings. Even if you don’t receive the form, you must submit accurate returns to pay state and federal taxes.
Are Gambling Losses Tax-Deductible in the State of Michigan?
For losses incurred, you can deduct these gambling losses from the total gambling winnings when filing a state or federal return. It requires not selecting the Standard Deduction on Form 1040 and filling out Schedule A (Itemized Deductions) and Schedule 1 (Additional Income and Adjustments to Income) forms.
It’s important to remember that you can’t deduct more than you win. For example, if you win $10,000 casino gambling but lose $20,000 in a year, you can only deduct $10,000. The remaining $10,000 must be reported as income tax. Keeping detailed records of deposits, withdrawals, wagers, gross receipts, and other gambling activities can make it easier to beat the standard deduction tax rates.
The W2-G form a Michigan gambling operator sends features essential wagering tax information, including if the site withheld any federal taxes. Deduct this amount from the overall gambling winnings. Add the revised figure to the Total Itemized Deductions line at the end of the Schedule A document. Then, update the total income figures on form MI-1040 to pay state taxes and form 1040 for federal.
Michigan Lottery Taxes
In Michigan, you can enter fun lottery draws in the real world or online. The state lottery withholds tax for prizes over $600. They report any win over this amount in the W2-G and automatically withhold federal and state gambling tax.
The total withholding rate is 28.05%, with 24% going to federal taxes and 4.05% to the state. Even if you win less than the $600 threshold, you must still report it in your income tax returns to the Internal Revenue Service and MDT.
How are Group Lottery Winnings Taxed in Michigan?
Although they have the same 28.05% total tax rate, group lottery winnings work differently in Michigan. Winners must visit the IRS and download Form 5754 (Statement by Person Receiving Gambling Winnings). The group must select one person who receives the payout and add them to Part 1.
In Part 2, under Persons to Whom Winnings are Taxable, there are fields to list all group members, their Tax Identification Numbers, and individual gambling winnings. You must add your group win value to your Michigan state tax and federal tax returns.
Taxes on Multistate Lotteries
Multistate lotteries are an exciting option, with various lottery games, including Mega Millions, Powerball, and Lotto America, offering massive prizes. These events are open in multiple states and are subject to federal and state taxes.
If you win a multistate lottery, you must add this activity when reporting Michigan gambling taxes. The same tax rate as the Michigan lottery applies; for winnings over $600, 28.05% is withheld. 24% goes to the IRS, while the remaining 4.05% is for MI tax revenues.
What Happens If I Don't Report Gambling Winnings?
Whenever a gambling provider issues a W2G form, they send a copy to the IRS. Hence, the agency is already aware of your gambling taxes. Not reporting taxable income can lead to further trouble and additional penalties. The IRS can add a monthly interest of 5%, topping out at 25%. The penalties are on top of the total taxable income, adding an additional tax bracket and costs.
So, by not reporting, you may end up paying up to ¼ extra on your federal tax return to the IRS, which could severely impact your yearly income. Not adding gambling winnings to a return falls under Unreported Income, which can potentially increase the tax liability.
FAQs
Is online gambling legal in MI?
Online gambling in Michigan has been legal since the Interactive Wagering Act passed in December 2019, allowing online betting, casino games, and poker rooms. Online sportsbooks launched first in 2020, followed by online casinos and poker rooms in January 2021.
What is the legal gambling age in Michigan?
The legal gambling age in Michigan is 21. Customers over this age can sign up for online sites and bet on sports, casino, and poker games. The age restriction is the same for commercial casinos in MI; however, some tribal casinos allow customers over 18. The lower 18+ entry barrier also applies to the Michigan Lottery.
Are gambling winnings taxable in Michigan?
Since gambling is regulated in Michigan, you must report this income in your state taxes. You can deduct gambling losses from total gambling winnings to minimize the gambling tax liability and reduce the amount to pay taxes on. In MI, gambling income tax rates are limited to 4.05%.
Do you have to claim online gambling winnings on taxes?
The same tax rules apply to casino gambling and other online activities. Operators must issue a W-2G form to the user and IRS if someone wins above a certain amount. The W2-G shows wagering activity and any tax withheld. Customers under the threshold can manually calculate wins, deduct losses, and report gambling taxes.
Do I have to tell the IRS about online gambling?
To comply with all laws, you must report online gambling income in the state and to the IRS. The federal tax rates for gambling are 24% and may automatically be withheld by operators. Not reporting the total income to the IRS can lead to additional costs of up to 25%.
Updated by
Daniel Smyth
Fact Checked by
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