gambling losses in michigan

[coreyjames06]

I have entered all of my W2G forms into the federal, as well as my losses, which brings my total win amount to 0. I am itemizing and the deduction is far more than the standard deduction, and it reflects this on the federal refund amount, I have the same refund with the W2G forms submitted as i did without them. However the state of michigan taxes are reflecting that i owe a significant amount. Why did the deductions cancel out the federal taxes, but had no impact on the state taxes??

[MaryK4]

TurboTax will transfer the deduction rom your Schedule A to your Michigan Schedule 1.

Michigan has a new individual income tax deduction for wagering losses sustained by casual gamblers, effective for tax years beginning in 2021.  The deduction is equal to the wagering losses claimed by the taxpayer as an itemized deduction on the federal income tax return for the same tax year. Thus, a casual gambler may only use this new deduction if the taxpayer elected to itemize deductions on the federal income tax return rather than take the standard deduction.  As before, a gambler can only use wagering losses to reduce gambling winnings and cannot reduce taxable gambling winnings below zero.

[coreyjames06]

That is correct, but if it transfers the deductions as i stated in my original question, then what is causing the state taxes to change drastically with the entries of the W2G forms? As the federal adjusted accordingly 

[BillM223]

I did a simple test with a w-2g on the federal along with a Michigan return. The federal return had a huge refund while the state return had a modest refund. Why? Because I assumed you had one big win and that the casino withheld 20% for the IRS.

But, since the losses balance out the winnings, in fact, I get nearly all that 20% back.

The reason that the state wasn't so dramatic is that I assumed that the state did not withhold nearly a high a percentage as the IRS. Yes, the Michigan form (MI-1040) showed the same losses on line 13 (Subtractions) as on the federal return, but since the withholdings were not as high, the effects were less dramatic.

So, the next result is, I assume that you are using the Online software and can't see your state forms, otherwise you would be able to see for yourself that the gambling losses show up on the Michigan return.

"Why did the deductions cancel out the federal taxes, but had no impact on the state taxes??" - At this point, we don't have enough information to know if this statement is true.

If you are using the Online product, please look on the left at Tax Tools, then down below it to Tools, then in the center for View Tax Summary - Oh, did I mention that you need to be in the state interview when you do this (no, I didn't). In this way you can see a summary of your state return, and perhaps be able to see what's the Subtractions are on the MI-1040.