As noted several times in this thread, it is correct that as a recreational player you can itemize your losses up to the amount of winnings on a federal level. It can wreak havoc on your return though as it forces you to itemize. Also, it can jack up your Adjusted Gross Income and phase you out of certain benefits. There is a handful of states that do not allow gambling losses as itemized deductions and/or have other rules that have the gambling income treated different on a state level. Perhaps Mike's issue was on the state level.