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Last month, the Michigan Legislature bestowed a holiday gift upon the state’s bettors.
On the extended final session day of 2021, the Michigan House of Representatives gave their approval to a bill that establishes a fresh tax deduction linked to individuals’ gambling losses.
In the final week of 2021, Governor Gretchen Whitmer signed it at her desk. This legislation will be applicable for the first year of Michigan’s online sports betting, online casinos, and online poker, making them available for the year 2021.
Recent developments in the Michigan Senate and House signify positive news for individuals responsible for Michigan gambling taxes, as Senate Bill 764 successfully passed the Senate Finance Committee, the full state Senate, and was subsequently approved by the House with a majority vote of 72-30.
What does this Michigan gambling bill mean for you come tax season?
Senate Bill 764, introduced by Senator Curtis Hertel from East Lansing, proposes that Michigan taxpayers should be allowed to deduct their gambling losses claimed on their federal tax return for the 2021 tax period and subsequent years.
The offsetting deduction would function in a manner akin to the allowance granted by federal law.
According to Hertel, the bill addresses a peculiar loophole that has had an impact on bettors in Michigan ever since the introduction of retail sports betting and online sportsbook and casinos in the past couple of years.
According to a report by Gaming Today, Hertel provided an illustration of a Michigan gambler who wagered $1,000 in the state and achieved a 50% success rate. Presently, this individual would be required to pay taxes on the $500 they won, without receiving any recognition for the $500 they lost, despite not making any overall profit.
Earlier this month, the Senator expressed their disagreement, stating, “It is unjust for individuals to be burdened with taxes on money they never earned or possessed. Additionally, there are numerous Michiganders who will unfortunately find themselves entangled in this unintended predicament.”
Under the new legislation, taxpayers will no longer have the option to deduct losses that surpass the amount of taxes owed. Additionally, deductions for losses can only be claimed for wagers made within Michigan, and not for those made in other states.
Hertel explained that in order to deduct losses, you need to have actual winnings. Therefore, if you bet $2,000 and didn’t win anything, you cannot deduct the $2,000 lost. The deduction for losses is only applicable to the amount you actually won.
The state of Michigan is anticipated to lose tax revenue ranging from $12-17 million, as reported by the Associated Press.
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