FAQ
Answers to common questions about prediction market taxes.
Do I have to pay taxes on prediction market winnings?+
In the U.S., yes. Prediction market profits are taxable income. The IRS has not issued definitive guidance on the exact treatment, but most tax professionals recommend one of four approaches: ordinary income, capital gains, Section 1256 (60/40), or gambling income.
What's the difference between the 4 tax methods?+
Ordinary Income reports net P&L on Schedule 1. Capital Gains treats each position as an asset sale (Form 8949 + Schedule D). Section 1256 gives a 60/40 long-term/short-term split (Form 6781). Gambling Income reports gross winnings with losses deductible only if itemizing.
Is the P&L calculator free?+
Yes. Importing your trades, viewing your P&L breakdown, and comparing tax methods is completely free. Downloading IRS-ready PDF forms (Form 8949, Schedule D, Form 6781) is a one-time paid feature.
Which platforms are supported?+
Kalshi (API), Polymarket (on-chain), Robinhood, DraftKings, and FanDuel via CSV upload. Manual entry is also available for any platform.
Is my data stored on your servers?+
No. All data stays in your browser's session storage. API credentials are used once for import and immediately discarded. Close the tab and your data is gone.
What is Section 1256 and does it apply to Kalshi?+
Section 1256 provides favorable 60/40 tax treatment for regulated futures contracts. Kalshi is CFTC-regulated, making a Section 1256 argument defensible. However, the IRS hasn't issued specific guidance for event contracts yet. Consult a tax professional.
What is the OBBBA gambling loss cap?+
Starting in 2026, the One Big Beautiful Bill Act (OBBBA) caps gambling loss deductions at 90% of winnings. For tax years 2025 and earlier, losses are fully deductible up to winnings if you itemize.
Do I need to report prediction market losses?+
You should. Under the capital gains method, you can deduct up to $3,000 in net capital losses against other income per year, with unused losses carrying forward. This can save you money.
How does Polymarket on-chain import work?+
Enter your Polygon wallet address and we read your ERC-1155 conditional token transactions directly from the blockchain. No API keys or login required — we only need your public wallet address.
How is cost basis calculated?+
We use FIFO (First In, First Out) for all positions. When you sell or a market settles, the earliest purchased shares are matched first. This is the most common and IRS-accepted method.
Can I import from multiple platforms in the same tax year?+
Yes. Import from as many platforms as you need. All trades are combined into a single P&L dashboard and the 4-method tax comparison covers everything together.
What counts as short-term vs long-term?+
Positions held for 365 days or less are short-term. Over 365 days is long-term, which gets a lower capital gains rate. Most prediction market trades are short-term since markets resolve quickly.
Can I import into TurboTax?+
Yes. The free tier includes a TurboTax-compatible CSV export. You can also use the Pro PDF forms if you prefer to file with Form 8949 directly.
Do you support international traders?+
Our tax calculations are currently U.S.-focused (IRS forms and rates). International traders can still use the P&L calculator, but the tax estimates and forms are designed for U.S. filing.
What is the refund policy?+
If you purchased Pro and haven't downloaded any forms, contact us within 7 days for a full refund at contact@predictiontaxes.com.