Kalshi Tax Guide
1099-MISC, Reporting & OBBBA
Kalshi is one of the most tax-advantaged prediction market platforms for US traders. It issues a 1099-MISC based on net annual profit: not gross winnings. Kalshi losses are fully deductible as ordinary losses, not subject to the 2026 OBBBA 90% sports betting cap. This guide covers everything: how Kalshi calculates what you owe, how to report it, and the critical difference from sportsbook taxes.
Kalshi tax summary
How Kalshi calculates and sends your 1099
Kalshi sends a 1099-MISC by January 31 for any calendar year in which your net profit exceeded $600. The critical detail: Kalshi calculates net profit, not gross winnings: it automatically nets your winning trades against your losing trades across all contracts for the year before determining what to report.
Net profit = total winnings − total losses − fees paid
This is how Kalshi calculates the 1099 amount. If you won $8,000 on winning contracts and lost $5,000 on losing contracts and paid $240 in fees, your net profit is $2,760 — that's what appears on the 1099.
Worked example: one full trading year
If your net profit is below $600 for the year, Kalshi does not send a 1099. You are still legally required to report the income on your tax return: the $600 threshold is Kalshi's reporting obligation, not your reporting obligation.
Access your 1099-MISC in your Kalshi account under Settings → Tax Documents. Kalshi also provides a full year-end transaction history for your records.
Why Kalshi losses aren't subject to the 2026 OBBBA cap
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, caps sports betting loss deductibility at 90% of sports betting winnings starting with 2026 taxes. Kalshi prediction market contracts are commodity derivatives under the Commodity Exchange Act: they are not "sports wagers" under the Internal Revenue Code. Kalshi losses are fully deductible ordinary losses. The 90% cap does not apply.
Tax comparison: $20,000 net loss scenario
Winnings: $30,000 | Losses: $50,000
Winnings: $30,000 | Losses: $50,000
Note: If you mix Kalshi prediction market trading with FanDuel/DraftKings sports betting, keep records clearly separated. The OBBBA cap applies only to your sports wager losses. Kalshi losses are accounted for separately.
How to report Kalshi income on your tax return
- 1 Download your 1099-MISC from Kalshi
Log in to your Kalshi account → Settings → Tax Documents. Download your 1099-MISC for the tax year. It will show your net profit in Box 3 (Other Income). Also download the full transaction history for your records.
- 2 Report net profit on Schedule 1, Line 8
Transfer the net profit amount from your Kalshi 1099-MISC to Form 1040 Schedule 1 (Additional Income), Line 8: "Other Income." Label it "Kalshi: prediction market income" in the description. This flows to Form 1040 Line 8 and is taxed at your ordinary income rate.
- 3 If you had a net loss: Schedule C or Schedule A
If Kalshi did not send a 1099 (net loss year), you may still be able to deduct the loss. Regular traders: report on Schedule C as business income/loss. Casual traders: Schedule A miscellaneous itemized deduction (subject to 2% AGI floor). Consult a CPA for the right treatment given your trading frequency.
- 4 Add state income tax
Most states tax ordinary income including prediction market profits. Add the net profit to your state return at your state's applicable rate. Arizona (2.5%), Colorado (4.4%), North Carolina (4.75%), Florida/Texas/Tennessee (no state income tax). See your state page for current rates.
- 5 Keep full transaction records
Kalshi's 1099 is the summary: retain your full year transaction history as backup. If the IRS queries your return, you want line-by-line documentation of each trade: contract name, date, buy price, sell price or settlement outcome, P&L.
Does it matter what type of Kalshi contract you trade?
No: all Kalshi contracts are commodity derivatives and all profits are ordinary income regardless of category. Sports, political, economic, weather, and crypto contracts are all treated identically for tax purposes. Kalshi nets all categories together on a single 1099-MISC.
How Kalshi and Polymarket tax treatment compare
| Factor | Kalshi | Polymarket QCEX |
|---|---|---|
| Tax form issued | 1099-MISC (net profit) | None: self-report required |
| Settlement currency | USD | USDC (stablecoin: minor crypto tax event) |
| Taxable income type | Ordinary income | Ordinary income (PM profit) + possible capital gain on USDC |
| OBBBA sports loss cap | Exempt (commodity derivative) | Exempt (commodity derivative) |
| Tracking tools needed | Kalshi Tax Documents tab sufficient | Koinly or TaxBit recommended for USDC tracking |
| Complexity | Low: one 1099, USD only | Moderate: no 1099, USDC basis tracking |
Common Kalshi tax questions
Does Kalshi send a 1099? +
Yes: a 1099-MISC for net annual profit above $600. Net profit means total winnings minus total losses for the calendar year. Kalshi calculates this automatically. You receive the form by January 31 of the following year. Download it from Settings → Tax Documents.
Are Kalshi losses tax deductible? +
Yes. Kalshi net losses are deductible as ordinary losses: not subject to the OBBBA 90% cap that applies to sports betting losses starting in 2026. If you had a net loss year on Kalshi, you can deduct it as an ordinary business loss (Schedule C for regular traders) or miscellaneous loss (Schedule A for casual traders). Consult a CPA for your specific situation.
What is Kalshi's fee model and how does it affect taxes? +
Kalshi charges a profit fee (0–7% of net profit, only on winning contracts). Fees reduce your net profit and therefore reduce your taxable income. They are already factored into the 1099-MISC amount Kalshi reports: you don't need to separately deduct fees.
Do I owe taxes if Kalshi doesn't send a 1099? +
Yes. The 1099 threshold ($600 net profit) is Kalshi's reporting requirement, not yours. If your net Kalshi profit is $300, you still owe taxes on it even though Kalshi won't send a form. Always report prediction market income on your return regardless of whether you received a 1099.
What if I use both Kalshi and a sportsbook like FanDuel? +
Keep your records separated. Kalshi income/loss goes on Schedule 1 (or Schedule C) as ordinary income: exempt from OBBBA. FanDuel/DraftKings sports betting income goes on Schedule 1 and sports betting losses are subject to the 2026 OBBBA 90% cap. The IRS distinguishes between commodity derivative contracts (Kalshi) and sports wagers (FanDuel). Mixing records creates confusion: track them separately from day one.
More tax and Kalshi guides
Prediction market taxes (full guide)
Federal tax treatment for all platforms: 1099s, ordinary income, OBBBA, and state taxes across platforms.
TaxesPolymarket tax guide
No 1099 from Polymarket QCEX: how to self-report USDC profits and track cost basis with Koinly or TaxBit.
GuideHow to trade on Kalshi
Account setup, deposit methods, placing your first order, and understanding Kalshi's market catalog.