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Last month, the Michigan Legislature offered a holiday gift to the state’s bettors.
The Michigan House of Representatives passed a bill on the last session day of 2021, establishing a fresh tax deduction linked to individuals’ gambling losses.
On December 27, 2021, Gov. Gretchen Whitmer signed the bill into law, officially making it available for play in Michigan’s first year of online sports betting, online casinos, and online poker.
Senate Bill 764 successfully navigated the Senate Finance Committee and the entire state Senate in recent weeks. Subsequently, the House granted its approval with a 72-30 vote. These recent advancements will undoubtedly be received as positive news for individuals responsible for Michigan gambling taxes.
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 state taxpayers should be permitted to deduct their gambling losses on their federal tax return for the 2021 tax period and beyond.
The deduction would effectively balance out winnings, just like what is permitted by federal law.
Hertel is of the opinion that the bill addresses a peculiar loophole that has had an impact on Michigan bettors ever since the state introduced retail sports betting, online sportsbooks, and casinos within the past two years.
According to a report by Gaming Today, Hertel illustrated the case of a Michigan gambler who wagered $1,000 in the state and achieved a 50% win rate. Presently, this individual is obligated to pay taxes on the $500 they won, yet they receive no acknowledgement for the $500 they lost, despite not making any actual profit.
Earlier this month, the Senator informed the Senate Finance committee that it is unjust for individuals to be taxed on income they never earned or possessed. The Senator emphasized that numerous Michiganders will unfortunately find themselves entangled in this unintended predicament.
Under the new legislation, taxpayers will no longer be permitted to deduct losses that surpass their owed taxes. Additionally, write-offs will exclusively apply to losses incurred through gambling activities within the state of Michigan, excluding those from other states.
According to Hertel, if you placed a bet of $2,000 but didn’t win anything, you cannot subtract the $2,000 loss. To be eligible for deducting losses, you must have actual winnings. Therefore, the deductible amount for losses is only equivalent to the actual amount of winnings.
The state of Michigan is projected to lose $12-17 million in tax revenue, as reported by the Associated Press.
