Kalshi taxes: how to report your trading profits
Kalshi doesn’t send a 1099 for your event-contract trades, but the profits are taxable. Here’s how Kalshi trading is taxed and how to report it for 2025 and 2026.
Updated October 7, 2026 · By the PolyTax team
The short version
- Kalshi doesn’t send a 1099-B for your event-contract trades. It sends a 1099-INT for interest and a 1099-MISC for rewards when you cross IRS thresholds.
- Your trading profits are taxable anyway. You report each closed position yourself.
- The IRS hasn’t said how event contracts are taxed. Most traders report them as capital gains on Form 8949 and Schedule D; Section 1256, gambling and ordinary income are the alternatives.
- Kalshi’s yearly transaction CSV has everything you need: contracts, prices, fees, and open and close dates for every position.
Do you have to pay taxes on Kalshi?
Yes. All income is taxable whether or not you get a tax form, and that includes profits from event contracts. Kalshi is a US exchange regulated by the CFTC and it has your tax ID from sign-up, so assume the IRS knows about your account. Losses matter too: depending on how you report, they can offset other gains or income.
What Kalshi sends you, and what it doesn’t
According to Kalshi’s help center, users who meet IRS reporting thresholds get:
- 1099-INT for interest paid on your balance
- 1099-MISC for rewards and promotions
- 1099-B and 1099-DA only for crypto transfers
None of them covers your YES/NO trades. For those you get a transaction history, and turning it into tax numbers is up to you. More detail in Does Kalshi send a 1099?
Four ways Kalshi profits can be taxed
With no IRS guidance on event contracts, tax professionals use four approaches. The same trades can produce very different bills.
| Treatment | Where it goes | Losses |
|---|---|---|
| Capital gains | Form 8949, Schedule D | Offset gains, plus $3,000 a year of other income; the rest carries forward |
| Section 1256 (60/40) | Form 6781, Schedule D | Offset gains; a net loss can be carried back three years against Section 1256 gains |
| Gambling | Schedule 1 line 8b, Schedule A | Only if you itemize, only up to your winnings, and only 90% of them from 2026 |
| Ordinary income | Schedule 1 line 8z | Not deductible unless trading is your business |
Capital gains is the most common choice and the conservative default: each contract is property you buy and sell. Almost every Kalshi position closes within a year, so the gains are short-term and taxed at your ordinary income rate.
Section 1256 is the most favorable on gains. Kalshi is a CFTC-designated exchange, and some practitioners treat its contracts like regulated futures: 60% of the net gain counts as long-term and 40% as short-term, and positions open on December 31 are marked to market. The IRS hasn’t confirmed this, so get a professional’s sign-off first. See Section 1256 and event contracts.
Gambling treatment comes up most for sports contracts. It’s usually the most expensive option for active traders, because winnings are taxed in full while losses are limited. See the 2026 gambling loss rule.
Whichever you choose, use it consistently from year to year and keep your records.
How to report Kalshi trades as capital gains
- Download your transaction history. On kalshi.com, open your account’s Documents page and download the yearly transaction CSV for each year you traded. A position held over New Year shows up in the year it closed.
- Work out each position. Each row is a closed position. Cost basis is the entry price times the number of contracts, plus opening fees. Proceeds are the exit price times the contracts, minus closing fees. A contract that settles in your favor pays $1; one that settles against you pays nothing.
- Sort by holding period. Held a year or less is short-term; longer is long-term. Nearly every Kalshi position is short-term.
- Fill in Form 8949. Kalshi trades aren’t reported on a 1099-B, so short-term trades go in Part I with box C checked and long-term trades in Part II with box F. You can list every trade, or attach a statement with the same columns and enter one total line per box with code M in column (f).
- Carry the totals to Schedule D. Box C totals go on line 3 and box F totals on line 10.
- Add interest and rewards. Report the 1099-INT interest on Form 1040 line 2b and the 1099-MISC rewards as other income, exactly as Kalshi reports them.
A quick example
You buy 100 YES contracts at 40¢ and pay $0.70 in fees. The market settles YES.
- Cost basis: 100 × $0.40 + $0.70 = $40.70
- Proceeds: 100 × $1.00 = $100.00
- Gain: $59.30, short-term
As a capital gain it’s taxed at your ordinary rate. Under Section 1256, $35.58 would count as long-term and $23.72 as short-term. Under gambling treatment, the $59.30 would be gambling winnings.
Mistakes to avoid
- Reporting one net number. Form 8949 needs proceeds and cost basis, not just your profit.
- Forgetting fees. Opening fees add to your basis and closing fees reduce your proceeds. Leaving them out overstates your gains.
- Counting trades twice. If you download exports that overlap, make sure each position is counted only once.
- Skipping a losing year. As capital losses, they can reduce tax on other gains and up to $3,000 of other income.
- Switching treatments every year. Pick one you can defend and stick with it.
Common questions
Does Kalshi send a 1099 for trading?
No. Kalshi sends a 1099-INT for interest and a 1099-MISC for rewards when you meet IRS thresholds, and a 1099-B or 1099-DA only for crypto transfers. Your event-contract trades aren’t on any form, so you report them yourself.
Are Kalshi winnings taxed as gambling?
There’s no IRS ruling. Most traders report Kalshi trades as capital gains; some treat them as Section 1256 contracts, and gambling treatment comes up mainly for sports contracts. Each gives a different result, so compare them with a tax professional.
Can I deduct Kalshi losses?
As capital losses, yes: they offset your gains plus up to $3,000 of other income a year, and the rest carries forward. Under gambling treatment, only if you itemize, and from 2026 only 90% of losses, capped at your winnings.
Do I owe tax on money I haven’t withdrawn?
Yes. A gain is taxable when the position closes or settles, not when you withdraw cash from Kalshi.
What if I didn’t report Kalshi profits in an earlier year?
You can file an amended return on Form 1040-X for that year. Correcting it before the IRS contacts you generally keeps penalties lower; a tax professional can help.
Sources
- Kalshi Help Center: What tax documentation does Kalshi provide?
- IRS: Instructions for Form 8949
- IRS: Instructions for Schedule D
- IRS: About Form 6781 (Section 1256 contracts)
This guide is general information, not tax advice. The IRS hasn't issued guidance on prediction markets, so check your situation with a tax professional before you file.