If I have gambling losses to completely offset gambling winnings, do I still have to file a non-resident return for a state where I received a W-2G (in this case Arizona)

[bbegun63]

I received a W-2G in Arizona for a slot machine hit of $1,200.  I live in NY.

Overall, my gambling losses exceed my winnings in 2016.  However, this was across several states. If you look solely at Arizona, I was a winner - but that was offset by losses in other states.

[NicoleU · Accepted solution]

Yes, you will have to file a Arizona State tax return because you earned income in that state. You will have to file a Non-Resident State Tax Return. 

For Federal purposes, gambling losses can be deducted as an itemized deduction up to the total of reported gambling and prize winnings. For example, you reported total gambling and prize winnings of $2,000. You can deduct up to $2,000 in gambling losses if you itemize deductions.

For the Arizona Lottery Exclusion, since you won an Arizona lottery prize after March 21, 1983, you are entitled to an exclusion of up to $5,000 of your lottery winnings from Arizona taxable income or source only.