For Massachusetts purposes, losses (up to as much as winnings aren't deductible even if they may be claimed as an itemized deduction on U.S. Form 1040 (Schedule A). The exception is gambling activities that are considered a trade or business or any gambling establishment in accordance with MGL Chapter 23K.
If the taxpayer was a Massachusetts resident, the full $amount would be included in Massachusetts income with no offsetting deduction. So, if the taxpayer won $amount on a lucky visit to the casino but let it ride and actually lost all $amount of it, for federal tax purposes that taxpayer would have net federal income of zero. However, if the taxpayer lived in Massachusetts, the full $amount would be included in state income with no offsetting deduction so the taxpayer would pay state income tax on the full $amount.
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