Gambling winnings are a tough subject when it comes to the tax they generate. You need to report the income and it will be reported on line 21 of the 1040. The IRS allows you to deduct your losses, but only to the extent of the winnings, and it is reported on Schedule A. If you don't have enough to itemize, the losses will not be considered.
You might be able to deduct the losses on your federal return, but you cannot eliminate the state tax liable on the winnings.
To enter the loss, type gambling losses into the search box
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