Tax Center

Prediction market taxes, explained.

Trading on Kalshi or Polymarket has real tax consequences, and, often, real opportunities. This is our plain-English library on how prediction-market gains and losses are taxed: what you owe, what you can claim, and how to keep records that hold up. No jargon, no hype.

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The basics

What every prediction-market trader needs to know: whether your winnings are taxable, what counts as a gain or loss, and how it gets reported.

Going deeper

How the mechanisms work

The machinery behind the savings: Section 1256 treatment, the $3,000 ordinary-income offset, and carrybacks.

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Primary sources

The federal authorities behind the figures on this page. Realize is not a tax advisor, so these are the law itself rather than our summary of it.

  • IRC §1256 The Section 1256 regime: the 60/40 long-term / short-term split and the year-end mark to market
  • IRC §1211(b) The $3,000 annual cap on net capital losses against ordinary income ($1,500 married filing separately)
  • IRC §1212(c) The elective three-year carryback of a net Section 1256 loss against prior-year Section 1256 gains
  • IRS Form 6781 Where Section 1256 gains and losses are reported, and where the carryback election is made