Polymarket Taxes: Complete Guide to Reporting Profits (2025)

Made money on Polymarket? You need to understand your tax obligations. Unlike gambling, Polymarket profits are typically treated as capital gains—which actually works in your favor. This guide covers tax treatment, reporting requirements, and tools for tracking.

How Polymarket Profits Are Taxed

The IRS treats Polymarket positions as capital gains, not gambling income. This is advantageous because:

• Losses can offset other capital gains
• Up to $3,000 of losses can offset ordinary income
• Excess losses carry forward to future years
• No automatic withholding (unlike gambling)

Short-Term vs Long-Term Gains

• Short-term (≤1 year): Taxed at ordinary income rates (10-37%)
• Long-term (>1 year): Preferential rates (0%, 15%, or 20%)

Reality: Almost all Polymarket positions are short-term since markets typically resolve within weeks or months.

Tax Forms Required

Important: Polymarket doesn't issue 1099 forms. You're responsible for tracking and reporting:

• Form 8949: Report each transaction (date, proceeds, cost basis, gain/loss)
• Schedule D: Summarize total capital gains and losses
• Form 1040: Include Schedule D totals on main return

Calculating Gains

Example: Buy 1,000 YES shares at $0.45 + $2 gas = $452 cost basis. Market resolves YES = $1,000 proceeds. Gain = $1,000 - $452 = $548 taxable gain.

Cost Basis Methods

• FIFO (First-In, First-Out): Default method, oldest shares sold first
• Specific Identification: Choose which shares to sell (best for tax optimization)

2025 Update: Must identify specific shares at time of sale, not retroactively.

Wash Sale Rules

Currently, wash sale rules do not apply to crypto/prediction markets (they're treated as property, not securities). However, this may change—legislation has been proposed.

Tax Tracking Tools

PolyTrack

Export your complete Polymarket transaction history with calculated gains/losses. Tax-ready format for Form 8949.

Crypto Tax Software

• Koinly: Supports Polygon, generates IRS forms
• CoinTracker: Good for DeFi, free basic tier
• CoinLedger: User-friendly interface

Common Mistakes

• Not reporting: No 1099 doesn't mean no taxes owed
• Forgetting crypto conversions: ETH→USDC is taxable
• Missing gas fees: These add to cost basis, reducing gains
• Waiting until April: Track throughout the year

International Considerations

• UK: Capital Gains Tax (10-20%)
• Canada: 50% of gains taxable at marginal rate
• Australia: CGT with 50% discount if held >12 months
• EU: Varies by country