| Actually, Illinois is taxing you on all your income but you will get a tax credit for the State Taxes paid in Indiana.
Many States including New Jersey tax you on your all income no matter where they come from, but, at the same time, you are entitled to a Tax Credit that was paid to the other State.
No State taxes you twice on any income generated from an other State, without giving you a Tax Credit, (an offset against Taxes paid to the other State).
Thus, your program is correct to tax you on the Gambling Winnings in Indiana, but, if you check the appropriate box, you would also be receiving a tax credit for the $160 taxes paid to Indiana State. | 
