Michigan Looks At Tax Deduction For Betting Losses

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Michigan sports bettors and other gamblers could end this tax year with a new state deduction tied to their wagering losses. 

Proposed by Sen. Curtis Hertel (D-East Lansing), Senate Bill 764 would allow Michigan state taxpayers to deduct the same gambling losses claimed on their federal tax return for the 2021 tax year and beyond. The state deduction would offset winnings, similar to what’s allowed under federal law.

The bill is on its way to the Senate floor after clearing the Senate Finance Committee today by a vote of 7-0. 

Hertel said his proposal fixes a “weird loophole” that has impacted thousands of Michiganders who have entered the betting market since Michigan launched retail sports betting in 2020 and online sportsbooks and casinos in 2021. Current Michigan law doesn’t allow state taxpayers to net winnings and losses.  

Because of the loophole, Hertel said if a person bets $1,000 in Michigan and wins half those bets, they would have to pay taxes on their $500 winnings, even though there’s 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 Finance committee. 

No Deduction Above Taxes Owed

Hertel clarified that SB 764 would not allow deducted losses to exceed taxes owed. 

“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,” he said. 

That is on par with federal law, too. Federal tax code limits the amount of losses deducted to winnings reported as income. For example, a person who loses $8,000 and wins $5,000 in a tax year would be limited to a deduction of $5,000. 

Hertel also clarified that his bill allows individuals to write off only losses wagered in Michigan, not other states. 

The Senator called the bill “a simple fix” to allow in Michigan what the federal government has allowed for years, while making the tax season easier for those who enjoy betting in the Great Lakes State. 

Says Hertel, “It’s really just a matter of fairness. If you didn’t win money you shouldn’t have to pay taxes on it.”

SB 764 now goes to the full Senate for its consideration. 

About the Author
Rebecca Hanchett

Rebecca Hanchett

Legislative Writer
Based in Kentucky's Bluegrass region, Rebecca Hanchett is a political writer who covers legislative developments at Gaming Today. She worked as a public affairs specialist for 23 years at the Kentucky State Capitol. A University of Kentucky grad, Hanchett has been known to watch UK. basketball from time to time.

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