Effective Jan. 1, Michigan sports bettors and casino gamblers can now deduct gambling losses on their state income tax returns, thanks to a bill that was passed in late December and signed into law by Gov. Gretchen Whitmer shortly thereafter.
Senate Bill 764 basically matches federal law when it comes to gambling losses, and it is immediately effective for any losses incurred in 2021.
And while at first blush this seems like a major victory for Michigan’s gamblers, in reality, it’s more like … well, a minor victory.
For starters, the losses can only be deducted against the amount a bettor has won. For instance, if someone loses $5,000, they can’t just deduct $5,000 from their taxable income. They would have to take into account any winnings they had over the course of the year.
In addition, gamblers can only deduct up to the amount they’ve won; basically, if someone won $10,000 but lost $15,000, they can only write off $10,000. Also, only bets made in Michigan count toward the state tax bill.
Itemize only
Furthermore, the law only applies to people who itemize their deductions, instead of taking the standard deduction (which is $12,500 for single people and $25,100 for married couples). In short: The only reason to actually deduct gambling losses would be if they — along with other deductions — are more than the standard deduction.
All told, according to an analysis by the House Fiscal Agency, the state can expect to lose between $10 million and $15 million in income tax yearly due to the bill. According to the analysis, only 7.6% of all Michigan residents itemize their deductions.
Nevertheless, the bill is clearly a victory for Michigan gamblers, especially those betting amounts big enough — and losing amounts big enough — to warrant taking a pass on the standard deduction.
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