Sports Betting Taxes in Michigan: What You Need to Know
Michigan has become one of the most robust sports betting markets in the United States since legalizing both retail and online sportsbooks in 2020. With this expansion comes a complex but important aspect of participation: taxation. Whether you’re a casual bettor or a seasoned gambler, understanding how taxes work on your sports betting winnings in Michigan is crucial for legal compliance and financial planning.
Taxable Nature of Gambling Winnings
In Michigan, all gambling winnings are considered taxable income, including winnings from sports betting, casinos, horse racing, and fantasy sports. This applies whether you win from a legal sportsbook at a tribal casino, a commercial operator like FanDuel or DraftKings, or an online betting app. The Internal Revenue Service (IRS) and the Michigan Department of Treasury require you to report all gambling income.
Federal Taxes on Sports Betting Winnings
Sports betting winnings are subject to federal income tax regardless of the amount. The IRS considers gambling winnings as “other income” and requires them to be reported on your Form 1040. If you win more than $600 and the payout is at least 300 times your original bet, the sportsbook is obligated to issue you a Form W-2G.
Furthermore, federal law mandates that sportsbooks withhold 24% of your winnings if they exceed $5,000 from a single wager. However, even if your winnings fall below that threshold, you are still legally obligated to report and pay taxes on them.
State Taxes on Sports Betting Winnings in Michigan
At the state level, Michigan treats gambling winnings as taxable income. As of 2025, the state income tax rate is a flat 4.25%. This means any winnings you report to the IRS must also be reported to the Michigan Department of Treasury. Michigan does not currently have separate tax brackets for gambling winnings—they are taxed at the same rate as any other income.
Tribal casinos and online operators may also issue W-2G forms, and some may withhold state taxes if your winnings are substantial. However, many do not automatically withhold taxes, so it’s the bettor’s responsibility to keep accurate records and pay what’s owed during tax season.
Local Taxes and City-Level Considerations
If you live in Detroit, additional taxes may apply. Detroit imposes a local income tax of 2.4% on residents, 1.2% on non-residents working in the city, and 2.0% for corporations. This includes income derived from gambling activities, so residents must also factor this into their tax calculations.
Deductions and Record Keeping
The IRS allows you to deduct gambling losses, but only up to the amount of your winnings and only if you itemize your deductions. Michigan aligns with federal law in this regard. To do this legally and correctly, maintain thorough records of all your bets, including:
- Dates and types of wagers
- Amounts wagered and won
- Names and locations of sportsbooks
- Winnings and losses per session
Online sportsbooks may provide you with win/loss statements, but they are not a substitute for personal record-keeping.
Reporting Requirements and Filing Forms
For federal taxes, you’ll use:
- Form 1040 (to report income)
- Schedule 1 (for other income)
- Schedule A (to itemize and deduct gambling losses)
- Form W-2G (if issued by sportsbook)
For state taxes in Michigan, you’ll file:
- MI-1040 (Michigan Individual Income Tax Return)
- MI-1040D (if you itemize deductions and include gambling losses)
Penalties for Non-Compliance
Failure to report gambling winnings can result in substantial penalties, including fines, interest on unpaid taxes, and in serious cases, criminal charges for tax evasion. The Michigan Department of Treasury and the IRS both use sophisticated software and data-sharing agreements with sportsbooks to detect unreported income.
Final Thoughts
If you engage in sports betting in Michigan, it is essential to treat your winnings as taxable income and keep accurate financial records. Always report your gambling income on your state and federal returns, and consult a tax professional if you are unsure how to file. Understanding and complying with Michigan’s sports betting tax laws will protect you from legal trouble and ensure you remain in good standing with tax authorities.
