With online wagering now legal and popular in the state of Michigan, many in the state have decided to try their luck. Did you know that you may have inadvertently triggered tax implications on your annual tax return? Many people now have questions. Not everyone’s tax situation is the same, so how you report wins and losses may differ from others.
Two Types of Gamblers:
These designations determine how you treat income and deductions as well as wins and losses. It is not a choice but determined by your facts and circumstances. However, up until 2021, it truly only applied to your federal tax return. In Michigan, there was no differentiation. You must include all wagering wins in your adjusted gross income, whether you are considered a professional gambler or a casual one. You will need to speak to a tax advisor to determine which applies to your situation.
However, if you are a casual gambler, like most are, you report your wagering losses on Schedule A (for those itemizing,) but you get no benefit if you take the standard deduction. However, when it comes to Michigan, there were no deductions at all for losses until now. A new Michigan amendment took affect for tax years 2021 and beyond. You can now take the same deduction on your Michigan return that you reported on your federal Schedule A for itemized deductions. Some things remain the same: you can only use wagering losses to reduce wagering income you are reporting. You can’t create a gambling loss on your return.
Michigan will now allow you to exclude the first $300 in winnings from your “household resources”. This figure is used for the calculation of several things including the property tax credit and the home heating credit, for those eligible.
The exclusion and deduction only apply to gaming conducting in Michigan.
“Are my winnings subject to tax in the state of Michigan?”
- Yes, to the extent they are also included in your federal income.
“Can I deduct my losses?”
- You cannot net your winnings and losses. What you can deduct depends on several things, speak to your tax advisor to be certain you are treating your situation correctly.
Public Act 168 (PA 168)
Date: December 29, 2022
What is Public Act 168 (PA 168)?
- Signed into law to amend the Michigan Income Tax Act (MITA), PA 168 created a new individual income tax deduction for wagering losses sustained by casual gamblers.
When does this apply?
- Tax years 2021 & after
Written by April Thiel, CPA