Do I owe Michigan state tax on sports betting and gambling winnings?
By the W2gMatch team · Sources checked 09-06-2026 · General information, not tax advice.
Yes. Michigan taxes gambling winnings at its flat 4.25% rate to the extent they are in federal adjusted gross income. Since tax year 2021 a casual gambler may deduct wagering losses on the Michigan return, but only the amount claimed as a federal itemized deduction, so a federal standard-deduction filer gets none. Nonresidents owe Michigan tax on winnings from Michigan casinos and tracks.
How Michigan taxes the winnings
“Gambling/lottery winnings are subject to Michigan individual income tax to the extent that they are included in your adjusted gross income.” [1] Michigan starts from federal AGI and applies a flat rate, set for tax year 2026 at 4.25%. [2] Detroit and other cities with an income tax may add a city tax; the 2021 loss deduction does not apply to city returns. [3]
Losses on the Michigan return
Before 2021 Michigan allowed no deduction, because itemized deductions are not part of AGI. Public Act 168 of 2021 created one for casual gamblers, effective for tax years beginning in 2021: “The deduction is equal to the wagering losses claimed by the taxpayer as an itemized deduction on the federal income tax return for the same tax year,” so it is available only to a taxpayer who itemized federally, and it “cannot reduce taxable gambling winnings below zero.” [3]
Because the Michigan figure is the federal itemized figure, the federal 90% limit flows straight through: a 2026 filer who deducts $90,000 of $100,000 losses federally deducts $90,000 in Michigan. Professional gamblers on Schedule C are unaffected, since their losses were already inside AGI. [3]
What is withheld at the window
Michigan casinos and the Michigan Lottery withhold state tax on winnings that meet the federal reporting thresholds; the amount appears on the W-2G and is claimed on the Michigan return. State withholding does not change what is taxable.
Residents, part-year residents and visitors
Nonresidents owe Michigan tax on winnings from casinos and licensed race meetings located in Michigan and on Michigan Lottery prizes, reported on Schedule NR. Their loss deduction is narrower: “only wagering losses attributable to wagering transactions placed at or through a casino or licensed race meeting located in Michigan may be deducted and only to the extent the gains on those transactions are allocated to Michigan.” [3] [1] Reciprocal-state residents still owe Michigan tax on these winnings; reciprocity covers wages, not gambling.
What is legal in Michigan, and who sends the forms
Michigan has commercial casinos in Detroit, tribal casinos statewide, and licensed online casinos and sportsbooks. Each issues W-2Gs at the federal thresholds and an annual statement on request.
The federal return underneath
Federal: for tax years beginning in 2026, only 90% of gambling losses are deductible (the 90% gambling loss cap).
Every state page sits on the same federal rules: all winnings are reported on Schedule 1 whether or not a form arrives, and losses are an itemized deduction capped at winnings and, from 2026, at 90% of losses under amended section 165(d). The federal loss page and the by-state table show how Michigan compares.
Related questions
I took the federal standard deduction. Can I deduct losses in Michigan?
No. The Michigan deduction equals the wagering losses claimed as a federal itemized deduction, so a standard-deduction filer has nothing to carry over.
Does the federal 90% limit apply in Michigan?
In effect, yes. The Michigan deduction is the federal itemized amount, which is already limited to 90% for tax years from 2026.
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Sources
- Michigan Department of Treasury, Are gambling/lottery winnings subject to Michigan individual income tax?, read September 6, 2026
- Michigan Department of Treasury, State individual income tax rate for 2026 tax year determined (4.25%), April 15, 2026
- Michigan Department of Treasury, Notice: New tax treatment of wagering losses for casual gamblers (PA 168 of 2021), January 13, 2022
Related
This page is general information about how U.S. federal and state tax rules apply to gambling, written to be checked against the sources it cites. It is not tax advice for your situation. A licensed CPA or enrolled agent should review your return before it is filed.