Yes, you have to pay tax on Kalshi.

The IRS treats earnings from Kalshi and other prediction markets like Polymarket as ordinary income. This means your winnings are taxed at your regular income tax rate - not the lower capital gains rate.

If you've made money on Kalshi, here's what you need to know to stay on the right side of the IRS.

How Kalshi Winnings Are Taxed

When you profit from event contracts on Kalshi, the IRS considers that taxable income.

Ordinary Income

Unlike stocks held for over a year (which qualify for lower long-term capital gains rates), prediction market winnings are treated similarly to gambling income or short-term trading profits. You pay your full marginal tax rate on these earnings.

Example: If you're in the 24% tax bracket and made $5,000 on Kalshi, you'd owe approximately $1,200 in federal taxes on those winnings.

What Tax Forms Will I Receive from Kalshi?

Depending on your activity level, you may receive

- Form 1099 - Reports your total winnings

- Form W-2G - Specifically for gambling/wagering winnings above certain thresholds

What If I Don't Receive a Form?

You still owe taxes.

Many users make the mistake of thinking "no form = no taxes." That's not how the IRS works. You're legally required to report all income, whether or not you receive documentation.

If you made $500 on Kalshi and didn't get a 1099, you still need to include that $500 as income on your tax return.

Can I Deduct My Kalshi Losses?

Yes - losses can offset your gains, which can significantly reduce your tax bill.

How it works: If you won $3,000 an dlost $1,000 on Kalshi, your taxable income from Kalshi is $2,000. You can only deduct losses up to the amount of your winnings (you can't use Kalshi losses to offset your salary).

The catch: You need records. Without documentation of your trades, you can't prove your losses to the IRS.

Common Kalshi Tax Mistakes to Avoid

1. Not Reporting Small Wins

Every dollar counts. The IRS doesn't have a minimum threshold for reporting income - if you made money, report it.

2. Forgetting to Track Losses

Losses are valuable at tax time, but only if you can prove them. Keep records of every trade.

3. Waiting for a 1099

Don't assume you're in the clear if you don't receive a form. The IRS may still know about your earnings.

4. Treating It Like Capital Gains

Prediction market profits are ordinary income, not capital gains. Using the wrong tax rate could trigger an audit.

5. Ignoring State Taxes

Your state likely taxes this income too. Check your local requirements — some states have higher rates than others.

What About Crypto and Other Prediction Markets?

If you also use Polymarket or trade cryptocurrency, your tax situation gets more complex:

- Polymarket earnings may have similar tax treatment

- Crypto tax rules require tracking cost basis for every transaction

- Trading between crypto and prediction markets creates additional taxable events

Many prediction market users also hold crypto, which means juggling multiple types of taxable activity. This is where automated tracking becomes essential.

How Summ Can Help With Your Kalshi Taxes

Manually tracking every Kalshi trade is tedious and error-prone. That's where Summ comes in.

What Summ Does

Summ recently partnered directly with Kalshi to help users:

• Automatically import your Kalshi trades - No manual data entry
• Calculate gains and losses accurately - Know exactly what you owe
• Generate tax-ready reports - Export data for your accountant or tax software
• Handle crypto tax too - Track prediction markets and crypto in one place

Why Use Summ for Kalshi Taxes?

Saves time - No spreadsheets or manual calculations

‍Maximizes deductions - Automatically tracks losses you might miss

‍Reduces errors - Avoid costly mistakes that trigger audits

‍One platform - Handles Kalshi, crypto, and more together

Important: Summ provides data and calculations, not legal or tax advice. We recommend working with a tax professional to review your specific situation.

Frequently Asked Questions

Do I have to pay tax on Kalshi if I lost money overall?

If your total losses exceed your total gains, you don't owe tax on Kalshi activity. However, you can't use those losses to offset other income (like your salary). Keep records in case the IRS asks.

How much can I make on Kalshi before I have to pay taxes?

There's no minimum. Technically, even $1 of profit is taxable income. In practice, the IRS is more likely to audit larger unreported amounts, but the legal requirement applies to all earnings.

Is Kalshi tax different from sports betting tax?

The tax treatment is similar — both are generally treated as ordinary income. However, Kalshi is federally regulated as a financial exchange, while sports betting falls under state gambling regulations.

Do I pay taxes on Kalshi if I live outside the US?

Tax obligations depend on your country of residence. US citizens and residents owe US taxes on worldwide income, including Kalshi earnings. Non-US persons should consult a tax professional in their jurisdiction.

Can I use crypto losses to offset Kalshi gains?

Generally, no. Crypto losses offset crypto gains, and gambling/prediction market losses offset those gains. However, tax rules can be complex — consult a professional for your specific situation.

What happens if I don't report my Kalshi income?

The IRS can assess:

• The tax you should have paid
• Interest on the unpaid amount
• Penalties for failure to file or pay

In serious cases, unreported income can lead to audits or legal action.

The Bottom Line: Yes, You Pay Tax on Kalshi

Are Kalshi winnings taxable? Yes

What type of income? Ordinary income

Do I need a 1099 to report? No - report regardless

Can I deduct losses? Yes, up to your winnings

Do state taxes apply? Usually yes

If you use Kalshi or other prediction markets, treat your activity like any other taxable income:

1. Track every trade throughout the year

2. Calculate your net gains (wins minus losses)

3. Report on your tax return as ordinary income

4. Pay what you owe to avoid penalties

5. Use Summ to automate the hard parts

Ready to simplify your Kalshi and crypto tax reporting? Try Summ today and know exactly what you owe before tax season hits.