Are Polymarket Winnings Taxable? What US Traders Need to Know (2024)
March 25, 2025
Short answer: yes. If you're a US person and you made money on Polymarket in 2024, the IRS expects you to report it. The more interesting question — and the one that can save you real money — is how you report it.
Polymarket is offshore. Does that matter?
Polymarket operates outside the US and doesn't issue 1099s to American traders. That does not mean the income is tax-free. US citizens and residents owe tax on worldwide income. The absence of a 1099 just means you're responsible for tracking it yourself — it doesn't create a loophole.
The three ways to treat Polymarket gains
Same framework as Kalshi, same unresolved IRS guidance.
1. Section 1256 (60/40 split)
If Polymarket contracts qualify as nonequity options or regulated futures contracts, every dollar of gain splits 60% long-term / 40% short-term regardless of hold time. At the 22% bracket on $5,000 net gains:
- 60% × $5,000 × 15% LTCG = $450
- 40% × $5,000 × 22% ordinary = $440
- Total: ~$890
2. Ordinary income
Net your wins and losses, report the total as ordinary income. $5,000 × 22% = $1,100. Simple, conservative, most expensive.
3. Gambling income
Report gross winnings on Schedule 1. Losses only deductible if you itemize, and only up to winnings. For most traders who take the standard deduction, this is equivalent to or worse than ordinary income.
| Treatment | Tax on $5,000 gains (22% bracket) |
|---|---|
| Section 1256 (60/40) | ~$890 — Save ~$210 |
| Ordinary income | ~$1,100 |
| Gambling income | ~$1,100+ |
Illustrative example. Your results will vary. This is not tax advice. Consult a CPA.
Polymarket wallet import is live
1256.tax now supports Polymarket wallet lookup directly — no CSV export needed. Connect your wallet address and we pull your 2024 trade history, then show you all three tax treatments side by side with your actual P&L numbers.
Related: How to report Kalshi taxes in 2024 · Kalshi in TurboTax: why the default costs you
Before April 15
Upload your Polymarket wallet address to 1256.tax and see the comparison for your real trades in about two minutes. It's a one-time $49 report — less than the difference between treatments for most active traders.