Kalshi trading profits are taxable income. Kalshi provides 1099 forms reporting your activity to the IRS. Gains are typically treated as ordinary income or short-term capital gains depending on holding period.
How Kalshi Reports to the IRS
Kalshi automatically reports your trading activity:
- Form 1099-MISC or 1099-B: Kalshi sends you (and the IRS) a form showing your annual gains/losses
- Threshold: If you have $600+ in winnings, you'll receive a 1099
- Your responsibility: Report all income on your tax return, even if you don't receive a 1099
How Profits Are Taxed
Kalshi profits are taxed as:
Short-Term Capital Gains (Most Common)
- If you hold contracts for less than one year, gains are short-term capital gains
- Taxed at your ordinary income tax rate (10%-37% depending on bracket)
- Most Kalshi trades resolve quickly (days/weeks), so this is typical
Long-Term Capital Gains (Rare)
- If you hold contracts for more than one year, gains qualify as long-term
- Taxed at preferential rates (0%, 15%, or 20%)
- Rare on Kalshi since most markets resolve in under a year
Deducting Losses
Trading losses can offset gains:
- Capital loss deduction: Losses offset capital gains dollar-for-dollar
- Excess losses: Up to $3,000 in net losses can offset ordinary income each year
- Carryforward: Losses beyond $3,000 carry forward to future years
- Keep records: Track all trades, not just winners
State Taxes
Don't forget state tax obligations:
- State income tax: Most states tax capital gains as ordinary income
- Rates vary: From 0% (no state tax in TX, FL, etc.) to 13%+ (CA, NY)
- Some states have gambling tax: Unlikely to apply to Kalshi (classified as commodity trading), but check local rules
Record-Keeping Best Practices
Keep detailed records for tax purposes:
- Download transaction history: Kalshi provides CSV exports of all trades
- Track cost basis: Record purchase price, sale price, and dates for each trade
- Save 1099 forms: Keep all tax forms Kalshi sends you
- Note market resolutions: Document how and when contracts settled
Tax Strategies for Kalshi Traders
1. Harvest Losses
Sell losing positions before year-end to offset gains (tax-loss harvesting).
2. Time Your Exits
If you have a winning trade near year-end, consider whether to realize gains this year or next based on your tax situation.
3. Track Everything
Use spreadsheets or tax software to track every trade throughout the year, not just at tax time.
4. Consult a Professional
If you're a high-volume trader or have complex tax situations, work with a CPA who understands trading income.
Is Kalshi Gambling Income?
No, Kalshi income is not classified as gambling:
- Commodity trading: Taxed as capital gains/losses, not gambling winnings
- Better treatment: Losses fully deductible (gambling losses only offset gambling winnings)
- No withholding: Unlike casino winnings, no automatic withholding on Kalshi payouts
Common Tax Mistakes
- Not reporting small gains: All income is taxable, even if under $600
- Forgetting about losses: You can deduct losing trades — don't leave money on the table
- Misclassifying as gambling: Report as investment/trading income, not gambling
- Poor record-keeping: Can't deduct losses you can't prove
Bottom Line
Kalshi profits are taxable, and losses are deductible. Kalshi provides 1099 forms, making reporting straightforward. Keep detailed records, understand short vs long-term capital gains, and consult a tax professional if you trade frequently.
Don't let taxes surprise you — set aside money for tax obligations throughout the year if you're making significant profits.