Entering Kalshi Trades in TurboTax: Why the Default Costs You Money
March 26, 2025
TurboTax doesn't have a Kalshi category. There's no dropdown for "prediction market event contracts." So most traders do the path-of-least-resistance thing: they enter net gains as other income or gambling income, pay ordinary rates, and move on. That default is almost certainly the most expensive option available to you.
What TurboTax doesn't tell you
TurboTax is built around forms, not tax strategy. It will happily let you report $4,000 in Kalshi gains as ordinary income at 22% ($880 owed) without ever mentioning that Section 1256 treatment — if it applies — would put that number at ~$627. That's $253 left on the table because no one flagged the option.
The Section 1256 path in TurboTax
If you or your CPA determine Section 1256 applies to your Kalshi trades, you'd report them on Form 6781 (Gains and Losses From Section 1256 Contracts and Straddles). TurboTax supports this form — it's just not the obvious path when you're searching for "where do I enter my Kalshi trades."
To get there: Federal → Wages & Income → Investment Income → Contracts and Straddles → Form 6781.
The problem: you need to know the dollar difference first
Before you or your CPA decides which treatment to use, you need to see the actual numbers on your actual trades — not a hypothetical example at the 22% bracket. If you traded small amounts all year, the Section 1256 difference might be $30. If you ran up five figures in gains, it could be $800+.
That's what 1256.tax does: upload your Kalshi CSV (or connect your Polymarket wallet), and we show you all three treatments with your exact P&L. You see the dollar difference before you decide — and before you open TurboTax.
| Treatment | TurboTax form | Tax on $4k gain (22%) |
|---|---|---|
| Section 1256 | Form 6781 | ~$627 |
| Ordinary income | Schedule 1 | ~$880 |
| Gambling income | Schedule 1 (W-2G) | ~$880+ |
This is not tax advice. Consult a CPA for your specific situation.
Related: How to report Kalshi taxes in 2024 · Are Polymarket winnings taxable?
Before April 15
Upload your Kalshi CSV to 1256.tax and see the dollar difference across all three treatments on your actual trades. Takes about two minutes. It's a one-time $49 report — usually less than the difference between treatments.