Yes, the thing is- the IRS first taxes your winnings. No way around that. Then if you have losses, you can enter those BUT ONLY UP TO YOUR WINNINGS. So if I win 10,000 (I wish) and lost 25,000, I can only enter 10,000 as a loss. Now if this was a business and I made 10,000 but had 25,000 in expenses, I could claim a loss. IT IS NOT THIS WAY WITH GAMBLING. The gambling loss is not applied against your winnings. Winnings and losses are reported in two different places. You will be taxed on winnings, no matter how much you lost. NEXT IF you itemize deductions (Taxpayers have the option of itemizing or taking the standard deduction) the gambling losses will be included, but if you take the standard (which is usually more) the losses won't count. I think that in your case, when you enter the winnings your tax goes up (makes sense, you have to pay tax on the winnings) and when you enter the losses, the tax due doesn't change because you still don't have more itemized deductions that the standard deduction, so the losses don't count.
