Gambling winnings are fully taxable on your return. You should include winnings from lottery, raffles, horse or dog racing, and casinos. If you won prizes, such as an automobile or a free trip, you would include the Fair Market Value of the prize won.
Typically, these winnings are reported to you on a Form W-2G. However, you are responsible to report all gambling winnings - even if no form was received.
How do I report my gambling losses?
Gambling Losses are reported in the return as Itemized Deductions (if you qualify) and are limited to the amount of gambling winnings. Do not deduct the losses from the winnings. You must enter both the winnings and the losses separately.
For additional information about the W-2G go here.