Michigan’s Governor, Gretchen Whitmer, has ushered in a new age for gambling by signing Senate Bill 764. The bill was signed last week and effectively overwrites some of the Income Tax Act of 1967.
Senate Bill 764 Will Allow Bettors to Deduct their Losses from Taxation
Thanks to the new bill, punters across Michigan will be able to declare their gaming losses and have them deducted from their income tax responsibility. Thanks to the bill’s retroactive nature, gamblers who played after January 1, 2021, can declare their losses and have them deducted from their taxation.
According to Michigan’s fiscal analysts, Senate Bill 764 is expected to reduce Michigan’s tax revenues by $12 million to $17 million. However, according to its own author, Senator Curtis Hertel, the bill will fix a loophole in Michigan’s tax law.
Michigan’s taxation laws already required bettors to include their winnings as taxable income but never took their losses into account. By introducing SB 764, the state will take a step towards easing things up for bettors on a losing streak – something that several other states have already done.
Before the Bill was approved, Hertel explained that it is not fair to have people pay taxes on money that they never earned or had. According to him, SB 764 “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 summarized it.
Only Responsible Gamblers Will Benefit from the Bill
However, gamblers should still be careful and make informed decisions as SB 764 will ease up taxes only for bettors who itemize their federal returns and for bettors whose losses do not exceed their winnings. Therefore, the idea isn’t to encourage gambling harm but rather to help out those who bet responsibly. Because of this, people who bet carelessly and pile up heavy losses will not be exempt from taxation. TurboTax elaborated on that matter:
“The amount of gambling losses you can deduct can never exceed the winnings you report as income. 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 has a total of 20 land-based casinos (17 tribal and 3 commercial ones) and has remarked a high online activity thanks to the state allowing iGaming through slot machines. Because of this, the introduction of SB 764 is a welcome one to all responsible bettors in the state.