Being a Loser Is Tax Deductible
First let's just expel any ideas about receiving lotto winnings tax free. Sorry, it just doesn't work that way. Cash winnings and the free market value of a non-cash prize (i.e. a car) are all taxable. Realistically speaking, your federal tax bracket can go as high as 39.6% depending on your other income and the amount of the winnings. That's actually not it either. Lottery winnings might also be subject to state income tax. So again depending on where you live, the bill could be over 50%. Think you get a capital gains rate break for lottery winnings? Nope. There isn't any income averaging to help lower your tax bill either.
What if you went to Vegas instead? When you lose money gambling you are entitled to a tax deduction for any losses you had. That's right. Losing can be a write-off. When you gamble and lose, you should keep documentary evidence of your ticket purchases (canceled checks, credit card charges, losing tickets, etc.). In some cases, even taxpayer estimates have been allowed, but I wouldn't go this route (could get you audited). Documentation is evidence and evidence is rarely scrutinized.
Losses that are taken as itemized deductions cannot go over what you actually won. I should also be noted that gambling losses aren't subject to the 2% floor on miscellaneous itemized deductions. These losses are not subject to the 3%-80% overall limitation on itemized deductions either. So hit the tables and good luck.