Record keeping for tax time, what to log and why it earns its keep.

The life of one position and the record each stage leaves behind. Capturing each fact when it happens is far more reliable than rebuilding it from memory months later. Illustrative, not a depiction of any single platform's screen, as of June 2026.

Start from the honest position: as of June 2026 the IRS has not issued guidance specific to prediction market event contracts, and reputable tax commentators describe the question as open. Reporting in late 2025 and 2026, including coverage by CNBC in December 2025 and analyses from several tax practices, lays out three treatments that taxpayers and their advisers reach for, each with different consequences and different record needs. This page describes them so you can keep the right records. It does not tell you which applies to you.

Capital gains. Treated as the purchase and sale of a contract, a position produces a gain or loss equal to proceeds minus cost basis, and gains and losses can be netted against each other. Net capital losses can offset a limited amount of ordinary income in a year, with the remainder carried forward. This treatment rewards clean per position records: the open price and date, the close price and date, the number of contracts, and the fees that adjust basis and proceeds.

Section 1256. Some advisers argue that certain exchange traded contracts fall under Section 1256, which taxes gains and losses on a sixty forty split, sixty percent long term and forty percent short term, regardless of how long the position was held. Commentators describe this as the most aggressive commonly filed position for binary event contracts, and note it has no direct statutory authority confirming it applies to them. If you and your adviser consider it, the records look much like the capital gains case, with careful attention to which contracts the position is claimed to cover.

Gambling income. Treated as gambling, winnings are includable in income and losses are deductible only by those who itemize, only up to winnings, and, beginning in 2026, only up to ninety percent of losses under a change in the One Big Beautiful Bill Act signed on 4 July 2025. This treatment leans on session records of winnings and losses rather than per contract basis. It is widely described as the least favourable of the three in 2026 because of the ninety percent cap, which is itself the subject of repeal proposals, so its future is uncertain.

Contested, and dated. The split between these treatments is unsettled because the IRS has not ruled, and the gambling loss cap may change. Treat the choice as a professional judgement about your facts, not a settled rule, and keep records detailed enough to support more than one path. See our companion guide on taxes on prediction market winnings for how these positions are framed.

What lands in your account at tax time varies by platform, and knowing what to expect tells you how much work the log has to do. On Kalshi, per its Help Center as of June 2026, you may receive a 1099-INT for interest paid on cash, a 1099-MISC for credits and rewards, a 1099-B for certain broker transactions, and a 1099-DA for digital asset transfers, each issued only when you cross the relevant IRS threshold. Kalshi also publishes a profit and loss statement, computed on a first in first out basis and updated on the first of each month, which it states is a tool rather than tax advice. None of these is a complete tax return line for your trading, and Kalshi says outright that members are responsible for the accuracy of their returns.

A practical trap deserves its own sentence. Practitioner write ups in 2026 note that a Kalshi transaction export can store values in cents rather than dollars. If you sum a profit and loss column from such a file without first dividing by one hundred, you can overstate or understate your result by a factor of one hundred. Before you trust any total from an export, check the units the file uses.

On Polymarket, the record lives largely on chain. Trades and settlements are recorded against your wallet, which means the data exists but you, or a tool you choose, must assemble it into something a return can use. There may be no conventional payer form at all. On PredictIt, the platform's published terms describe its own fee and withdrawal mechanics, and historically it has provided account statements, but here too the obligation to total and report sits with you. The common thread across all three is simple: the platform gives you pieces, and your log is what turns the pieces into a number.

One change makes careful records matter more if any part of your activity is treated as gambling. The One Big Beautiful Bill Act, signed on 4 July 2025, limits the deduction for gambling losses to ninety percent of those losses beginning in the 2026 tax year, and still only up to winnings and only for those who itemize. The widely cited consequence is that a person who wins and loses the same amount in a year can be left with taxable income they did not actually keep, because ten percent of the losses is no longer deductible.

Two things follow for record keeping. First, the gap between treatments grows, so the detail that lets you and your adviser support a capital gains framing rather than a gambling one becomes more valuable. Second, if a gambling framing does apply, the law leans on session level records of winnings and losses, so a casual mental tally is no longer enough. Note also that the ninety percent cap is contested: several repeal proposals were introduced after the law passed, and whether the cap survives in its current form is genuinely uncertain as of June 2026. Keep records that work whichever way the rule lands.

A record system only works if you keep using it, so favour something light over something perfect. A single spreadsheet with the columns in the table above is enough for most people, updated whenever you close a position rather than saved for a year end scramble. Where a platform offers an export, download it regularly, check the units, and reconcile it against your own log rather than trusting either one alone. The two will not always agree, and the disagreement is exactly what you want to catch early.

Keep more than the final number. Save the raw exports, a few dated screenshots of important positions and settlements, and any platform statement, so you can show how a figure was built and not merely assert it. Settlement is where surprises happen, so it helps to understand how a market resolves before you rely on the result; our guide to how settlement sources are chosen explains why two venues can resolve the same event differently, which is the kind of detail a good record notes at the time.

On retention, a common rule of thumb is to keep tax records for at least three years from when you file, and longer in some situations, because the window the IRS has to examine a return varies with the facts. Because the underlying records, the exports and screenshots and your log, are what let you reconstruct a figure if it is ever questioned, keep them, not just the summary. And remember that fees belong in every entry: our guide to fees and how they affect returns shows how the same costs that shrink your return also change the gain or loss you report. None of this is tax advice, and the right retention period and treatment for your situation is a question for a tax professional.