Sports Betting Taxes in Michigan: What Bettors Need to Know

Legal Landscape of Sports Betting in Michigan

Michigan officially legalized sports betting in March 2020 with the passage of the Lawful Sports Betting Act. The state allows both retail (in-person) and online sports betting, which is regulated by the Michigan Gaming Control Board (MGCB). Licensed commercial casinos in Detroit and tribal casinos throughout the state operate sportsbooks, along with several licensed online platforms.

Taxation Structure for Operators

Michigan levies taxes on sports betting revenue generated by licensed operators. The structure is as follows:

Retail Sports Betting Tax Rate: 8.4%
Online Sports Betting Tax Rate: Tiered from 20% to 28% based on annual adjusted gross sports betting receipts.

For commercial operators based in Detroit, an additional 1.25% municipal services fee is imposed, effectively raising their total tax rate.

Use of Tax Revenue

The tax revenue collected from sports betting in Michigan is distributed among various public programs:

30% to the Michigan State School Aid Fund
5% to the Michigan Transportation Fund
65% to the State Sports Betting Fund, which covers regulatory costs and supports responsible gaming initiatives

In Detroit, the 1.25% city tax supports public safety, economic development, and neighborhood improvement programs.

Taxes for Individual Bettors

If you place sports bets and win in Michigan, your winnings are considered taxable income both at the federal and state levels.

Federal Taxes:

The IRS considers all gambling winnings taxable income.
Winnings must be reported on your federal income tax return using Form W-2G (if issued) or Form 1040.
Large payouts may be subject to withholding at a flat rate of 24%.

State Taxes:

Michigan’s flat income tax rate is 4.25%, and this applies to gambling winnings.
Bettors are responsible for reporting all gambling income, even if they don’t receive a W-2G.

Record-Keeping:

Bettors should keep detailed records of wins, losses, dates, locations, and amounts.
Losses can be deducted only if itemized, and not in excess of the total amount of winnings.

Tribal Casino Exemptions

While tribal casinos operate under sovereign status, they still adhere to tribal-state compacts. These compacts include provisions for revenue sharing and contributions to the Michigan Native American Heritage Fund and other state funds. However, tribal entities do not pay the same tax rates as commercial operators.

Impact on Michigan’s Economy

Since legalization, sports betting has generated hundreds of millions in handle (total amount wagered), with tens of millions contributed to state revenue. The added funds have supported public education, infrastructure, and responsible gaming programs.

Summary for Bettors

Sports betting is fully legal and regulated in Michigan.
Winnings are taxable at both the federal and state levels.
Operators face tax rates ranging from 8.4% to 28%.
Detroit imposes an additional 1.25% tax on commercial operators.
Accurate record-keeping and income reporting are essential for bettors.

Michigan’s sports betting tax structure strikes a balance between promoting economic growth and funding essential public services. Whether you’re a casual bettor or a high-stakes player, understanding the tax obligations is key to staying compliant.