The Michigan House of Representatives has moved forward on a bill designed to provide tax relief to Michigan gamblers. The new bill was approved by the House during the final session of 2021 and aims to provide relief to gamblers who have lost some of their bets in 2021.
SB 764 seeks to close a loophole that would see gamblers paying tax on any wins they had in 2021, even if it was an overall losing year for them.
After the bill made it through the Senate Finance Committee and the full Senate recently, the full Michigan Legislature approved the bill in the final session of the year. That moved the bill forward to the final stage before it comes into effect: Final approval by Gov. Gretchen Whitmer.
This should be welcome news for players at Michigan online casinos, who may have been facing an odd situation when they did their taxes for 2021. Without this bill, Michiganders would be looking at the need to pay state taxes on any winnings from 2021, while being unable to claim any losses.
Closing a Loophole
The main point of SB 764 is to close an apparent loophole that gamblers in Michigan would have faced since the opening of the Michigan online gaming market at the start of 2021. As the law currently stands, gamblers would have been on the hook for taxes on winnings, but unable to claim losses.
That would present an odd situation for many Michiganders. For example, if an online poker player won $100 from one MTT, but over the year, spent a total of $200 on online poker, the player would be on the hook for taxes on the $100 win, despite the fact they actually lost $100 on the year.
Essentially, the point of the bill is to ensure players don’t have to pay taxes on an overall losing year. The bill only allows players to claim gambling losses against total wins, which means winning players will still pay taxes on the total amount won, minus losses, whereas losing players will need to have won some money during the year in order to claim any losses against those wins.
Final Stages
Expectations are that the bill, proposed by Sen. Curtis Hertel (D-East Lansing), will be in place in time for Michigan gamblers to do their 2021 taxes. Passage by the House marks the penultimate stage in the process — signature by Gov. Gretchen Whitmer.
SB 764 allows for Michiganders to deduct the same gambling losses as allowed on their federal taxes and is similar to how federal law handles the situation.
“The bill would reduce individual income tax revenue by approximately $12 million to $17 million per year, depending on the future growth in gaming activity,” David Zin, a fiscal analyst for the state, wrote in a bill analysis. “The bill would allow gamblers who gamble in non-Michigan locations not only to deduct losses attributable to Michigan gaming but also would allow them to deduct losses attributable to gaming that did not occur in Michigan.”
Bill 764 looks to be some welcome relief for Michigan gamblers who may have been caught in an unintended loophole in the coming tax season. While it is not quite a done deal yet, the tax relief bill is now waiting on the Governor’s desk for final approval.
