Gambling winnings include winnings from lotteries, raffles and sweepstakes,
and proceeds from wagers. Gambling winnings from charity-sponsored events
are also includable in gross income. You may or may not receive Form W-2G
depending on the type of gambling, the amount of gambling winnings, and
generally the ratio of the winnings to the wager. Gambling winnings are
reported on line 21 (Other income) of Form 1040. The amount to report on
line 21 is your gross winnings less the cost of placing the related winning
bet or wager. You cannot net gambling losses against gambling winnings and
report the net amount on line 21. If you have gambling losses, you may be
able to claim them as a miscellaneous itemized deduction on Schedule A, but
only to the extent of gambling winnings. "Professional gamblers" have a
different set of rules to follow. Bernie, Brooklyn, N.Y.: Under what
circumstances would I be subject to a 10% tax penalty on a distribution from
a Health Savings Account? After all, I am using the distribution proceeds
for paying medical bills.