Gov. Gretchen Whitmer Signs Law To Allow Michigan Tax Deductions For Betting Losses

What does this Michigan gambling bill mean for you come tax season?

Proposed by Sen. Curtis Hertel (D-East Lansing), Senate Bill 764 allows Michigan state taxpayers to deduct the same gambling losses claimed on their federal tax return for the 2021 tax period and beyond.

The deduction would offset winnings, similar to what is allowed under federal law.

Hertel believes that the bill helps fix a “weird loophole” that has affected Michigan bettors since the state launched retail sports betting and online sportsbook and casinos over the last two years.

In a report from Gaming Today, Hertel used the example of a Michigan gambler betting $1,000 in the state and winning half of those bets. Currently, they would have to pay taxes on the $500 won, but get no credit for the $500 lost, even though that gambler made no profit.

“That’s wrong. No one should have to pay taxes on money that they never earned or had. And there are many, many Michiganders who will be caught up in this situation, which is really unintentional,” the Senator told the Senate Finance committee earlier this month.

With the new bill, taxpayers wouldn’t be allowed to deduct losses to exceed taxes owed. Write-offs can also only be for losses wagered in Michigan, not other states.

“So, if you bet $2,000 and didn’t win anything, you don’t get to deduct the $2,000 you lost. You have to actually have to have winnings to be able to deduct losses. So, the amount you deduct in losses is only equal to what you actually won,” Hertel said.

According to the Associated Press, the law is expected to cost the state of Michigan $12-17 million in tax revenue.