Polymarket taxes: how to report your trades
Polymarket doesn’t send tax forms, but your profits are taxable. How Polymarket trades, redemptions and rewards are taxed, and where they go on your return.
Updated October 7, 2026 · By the PolyTax team
The short version
- Polymarket sends no 1099 or other tax forms, but your profits are still taxable.
- Polymarket shares are tokens on the Polygon blockchain, so they’re digital assets. From tax year 2025 they go in the digital-asset boxes of Form 8949.
- Selling shares, redeeming winners and holding losers through resolution all create gains or losses. Rewards are ordinary income.
- Polymarket’s activity history leaves out trading fees on trades from about January to April 2026. Use the on-chain amounts or your gains will be overstated.
Do you have to pay taxes on Polymarket?
Yes. US taxpayers owe tax on their income whether or not a form is issued. Polymarket is based outside the US and doesn’t send 1099s (see Does Polymarket send a 1099?), but every trade is recorded on a public blockchain.
What creates a taxable gain or loss
- Selling shares before the market resolves. Your gain or loss is what you received minus what you paid, fees included.
- Redeeming winning shares for $1 each after the market resolves.
- Losing shares become worthless when the market resolves against you. That’s a loss in the year it resolves, even if you never redeemed them.
- Splitting, merging and converting (turning USDC into a full set of YES and NO shares and back, or converting positions in multi-outcome markets) changes your cost basis.
- Rewards, such as liquidity rewards, holding rewards and maker rebates, are income when you receive them.
Moving USDC in or out of Polymarket isn’t a trade by itself. Selling USDC for dollars on an exchange is technically a sale, but because USDC tracks $1 the gain or loss is usually zero.
How Polymarket profits are taxed
The IRS hasn’t issued guidance on prediction markets. Most traders treat Polymarket shares as capital assets: each purchase is a lot, and each sale, redemption or resolution closes it. Almost every position is held for less than a year, so the gains are short-term and taxed at your ordinary income rate.
Gambling and ordinary-income treatment are the alternatives (see the 2026 gambling loss rule). Section 1256’s 60/40 split generally isn’t available for the on-chain Polymarket site, because it isn’t a CFTC-regulated exchange.
Where it goes on your return
- Answer the digital asset question. Form 1040 asks whether you sold, exchanged or otherwise disposed of a digital asset during the year. If you traded on Polymarket, the answer is yes.
- Form 8949. For 2025 and later, short-term trades go in Part I with box I checked (digital assets not reported on a 1099-DA) and long-term trades in Part II with box L. For 2024 and earlier, use boxes C and F. You can list every trade, or attach a statement with the same columns and enter one total line per box with code M in column (f).
- Schedule D. Short-term totals go on line 3 and long-term totals on line 10.
- Rewards. Report liquidity rewards, holding rewards and rebates on Schedule 1, line 8v, as digital assets received as ordinary income.
The early-2026 fee problem
For trades from about January to April 2026, Polymarket’s activity history shows each trade’s amount before fees. The blockchain shows what actually changed hands: purchase fees were taken in shares and sale fees in cash. A report built only from the history overstates your gains. On one active wallet we checked, the difference was $635.77.
PolyTax checks every trade from that period against its on-chain transaction and uses the amounts that actually moved.
Polymarket US
The Polymarket US app runs on a CFTC-regulated exchange and settles in dollars rather than on-chain. Its contracts aren’t digital assets, so on Form 8949 they go in box C or F, and some practitioners treat them as Section 1256 contracts, like Kalshi’s. Rewards paid in dollars are other income on Schedule 1, line 8z. If Polymarket US sends you a tax form, use its figures.
Mistakes to avoid
- Using the wrong address. Use the address on your Polymarket profile, which holds your positions, not the wallet you log in with.
- Forgetting unredeemed losers. Losing shares you never redeemed are still a loss when the market resolves.
- Counting deposits as income. Moving USDC in or out isn’t a gain.
- Leaving out fees, especially on early-2026 trades.
- Taxing open positions. Under capital gains treatment, a position isn’t taxed until you sell or redeem it or the market resolves.
Common questions
Does Polymarket report to the IRS?
Polymarket doesn’t send 1099s or other US tax forms. You still have to report your gains, and your trades are recorded on a public blockchain.
Is Polymarket taxed as gambling?
The IRS hasn’t said. Most traders report Polymarket trades as capital gains on Form 8949; gambling and ordinary-income treatment are the alternatives and usually cost more.
Do I pay tax if I haven’t withdrawn from Polymarket?
Yes. A gain is taxable when you sell or redeem shares, or when a market resolves against you, not when you withdraw.
Can I deduct Polymarket losses?
As capital losses, yes: they offset your gains plus up to $3,000 of other income a year, and the rest carries forward to future years.
Which wallet address should I use?
The address shown on your Polymarket profile. That’s the wallet that holds your positions, not the one you sign in with.
Sources
- IRS: Instructions for Form 8949
- IRS: Digital assets
- IRS: Schedule 1 (Form 1040)
- IRS: Instructions for Schedule D
This guide is general information, not tax advice. The IRS hasn't issued guidance on prediction markets, so check your situation with a tax professional before you file.