Michigan Gambling Losses Now Tax-Deductible, State Joins Others in Write-Offs

Posted on: December 31, 2021, 09:21h. 

Last updated on: December 31, 2021, 09:55h.

Michigan gambling losses are now tax-deductible in state income filings.

Michigan gambling loss casino tax income
The Michigan State Capitol sign. Michigan gambling losses, effective immediately, qualify for tax deductions up to the amount a gambler won in a given year. (Image: H&R Block)

Michigan Gov. Gretchen Whitmer (D) signed Senate Bill 764 last week. The tax legislation amends the state’s Income Tax Act of 1967 to allow gamblers to deduct their gaming losses from their income tax responsibility.

SB 764 allows Michigan residents to claim the same gambling losses that they do on their federal returns. Bill author state Sen. Curtis Hertel (D-East Lansing) says the statute fixes a “weird loophole” in Michigan’s tax law that brings it in line with many other states that permit gambling losses on their itemized deductions.

Michigan’s legislative fiscal analysis projects that the gambling tax amendment will result in the state seeing its annual tax revenue reduced by $12 million to $17 million.

Gambling and Taxes

The IRS says gambling losses are tax deductible, but only to the extent of one’s gambling winnings. The deduction, TurboTax explains, is only available for filers who itemize their federal returns.

A key matter, however, regarding deducting gambling losses is that the individual must also have gambling winnings. For instance, if a person loses $2,000 gambling on sports, that person cannot simply deduct $2,000. Instead, the person can only deduct losses against the amount they won.

“The amount of gambling losses you can deduct can never exceed the winnings you report as income,” a TurboTax explainer details. “For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.”

Michigan’s state tax law has long required gamblers to include all winnings as taxable income. But the law now includes a provision that allows losses up to winnings to be subtracted.

No one should have to pay taxes on money that they never earned or had,” Hertel argued prior to Whitmer’s signing of SB 764. “It makes tax season less complicated for Michiganders who participated in gaming this year.

“It really is just a matter of fairness, where if you didn’t win money, you shouldn’t have to pay taxes on it,” Hertel concluded.

SB 764 is retroactive to January 1, 2021, meaning gaming losses this year can be deducted.

Michigan Gaming Industry

Michigan has only three commercial land-based casinos, all of which are in Detroit. The state additionally has 17 brick-and-mortar casino venues owned and operated by Native American tribes.

Michigan is one of only six states that allow iGaming with interactive slot machines and table games. The others are New Jersey, Delaware, Pennsylvania, West Virginia, and Connecticut. Nevada allows online poker, but not slots and table games.

Michigan is also one of numerous states that allow sports bets to be wagered remotely from anywhere in the state. A total of 18 states have legal mobile sports betting operational.