What is the tax on gambling or lottery winnings in Michigan?

Alex K.

The income tax on gambling winnings in Michigan is currently 4.25%. State tax covers all gambling winnings on casino games, sports betting, or horse racing. All charitable gaming wins are also covered by the same tax rate.

In addition to Michigan income tax, you must pay a federal income tax on gambling winnings if you win over $5,000. Federal tax on gambling winnings is 24%, and this is withheld by the casino. However, you will be subject to a 28% withholding tax rate if you don’t supply a valid taxpayer identification number when requested.

Casinos in Michigan must report all gambling wins to the Internal Revenue Service (IRS) if they are large enough. You must also declare your big wins on your Form W2-G.

For bingo games or slots, you must only declare winnings above $1,200. Keno wins of $1,500 or more must also be reported. If you hit it big in a poker tournament and win over $5,000 in Michigan, those must be reported too.

You can report your casino wins on the IRS Schedule 1. That is an extra form which shows additional income over the financial year. The winnings must also be reported on your regular tax return.

You are also allowed to claim gambling losses too. In the Schedule A portion of the tax return, you can fill out the ‘Other Itemized Deductions’ portion. You won’t be allowed to claim more losses than your winnings, however. And in Michigan, gambling can’t be claimed as a deductible expense.

The lottery is perfectly legal in Michigan, but any winnings are also subject to state and federal income tax. You will have to pay both state and federal tax whether you are playing the POWERBALL, MEGA MILLIONS, or local draws like Lotto 47.

As with other types of gambling, you will be subject for tax if your Michigan Lottery prize exceeds $5,000. The Michigan Lottery will withhold both federal tax at 24% plus the 4.25% in state tax.

The Michigan Lottery suggests that any winners contact the Michigan Department of Treasury to see if any extra tax payments have to be made.

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