Michigan Gambling Tax Deduction Awaiting Whitmer’s Signature

[mrbowling300]

Gambling winnings are reported to the IRS using From W2-G. You are allowed to deduct gambling losses as an itemized deduction to the extent of your gambling winnings.

Here in Michigan, those gambling losses have historically been non-deductible. I have several clients who play video poker, slot machines, and can have a total of $50,000 or more of W2-G income with the losses to offset. In Michigan, the tax rate is 4.25%, so even though their net may be zero, to Michigan you would owe $2,125 on $50,000 of reported jackpots. For some, it got to the point where I told them to just have the casino withhold 4.25% for MI taxes.

Now, a bill has passed the Michigan House and awaits the governor's signature to align Michigan with the federal law where you can deduct losses to the extent of winnings.

For anyone in MI that is a recreational gambler this is huge for them.

Michigan Gambling Tax Deduction Awaiting Whitmer’s Signature | LegalSportsBetting.com

LANSING, Mich. - The Michigan House of Representatives passed a bill that creates a new state tax deduction for sports betting and other gambling losses

www.legalsportsbetting.com

 

[ComptrBob]

Its interesting to note that gambling income also affects your federal MAGI (Modified Adjusted Gross Income) which generally doesn't take into account most deductions like gambling losses (for non-professional gamblers). Once MAGI gets over certain amounts, certain Federal deductions get reduced and Federal penalties can be applied.

 

[mrbowling300]

Its interesting to note that gambling income also affects your federal MAGI (Modified Adjusted Gross Income) which generally doesn't take into account most deductions like gambling losses (for non-professional gamblers). Once MAGI gets over certain amounts, certain Federal deductions get reduced and Federal penalties can be applied.

Was always a problem with some of my gambling clients who show $200,000 of W2G-s but piss it all back into the slots. The get doubly screwed.

 

[ComptrBob]

Was always a problem with some of my gambling clients who show $200,000 of W2G-s but piss it all back into the slots. The get doubly screwed.

Yep, I'm sure you are aware that exceeding MAGI can have a bizarre effect, one year, 2011, I had $105K of W2-Gs. Calendar wise, this gets reported during the next year usually April, but it may get extended. Because of this, the Feds only assess the penalties, two years after the year the large MAGI occurs. In my case, my cost of Medicare Part B for 2013 doubled.

 

[mrbowling300]

Yep, I'm sure you are aware that exceeding MAGI can have a bizarre effect, one year, 2011, I had $105K of W2-Gs. Calendar wise, this gets reported during the next year usually April, but it may get extended. Because of this, the Feds only assess the penalties, two years after the year the large MAGI occurs. In my case, my cost of Medicare Part B for 2013 doubled.

As soon as I started reading this, I knew what you were going to say before I got to the end, lol. Any of the limitations tied into AGI, i.e., back when you could deduct unreimbursed job expenses, which were subject to the 2% of AGI minimum, or medical which is 7.5% of AGI limitation, or even the 3% of itemized phase out on income greater AGI greater than $160,000 back in the day. The hidden tax costs of gambling!