College Student on Kalshi or Polymarket? Taxes, the Kiddie Tax and Your Parents' Return

Yes, students pay tax on prediction market profit like anyone else, and being claimed as a dependent can make it worse. A dependent gets a smaller standard deduction, and if you're under 24, a full-time student and don't earn enough to cover half your support, investment income above $2,700 in 2026 may be taxed at your parents' rate under the kiddie tax. Whether event-contract profit counts as unearned income is a further open point, but capital gains generally do.

OddsFile is software, not tax advice. The IRS has not issued guidance on how prediction-market contracts are taxed. This article explains the options and the sources behind them; a tax professional can tell you which position fits your situation.

Three rules that apply to students

Do you need to file?

If someone can claim you as a dependent, your filing threshold is much lower than the $16,100 single standard deduction. It depends on your earned and unearned income. Use the IRS interactive tool or the Form 1040 instructions. The dependent standard deduction has a floor of $1,350 in 2026 and rises with earned income, up to the regular amount.

So a student with no job and a $2,000 Kalshi profit may well have to file, even though that's far below $16,100.

The kiddie tax

IRS Topic 553 says Form 8615 applies when a child's interest, dividends and other unearned income total more than $2,700, and the child:

• was under 18 at the end of the year; or
• was 18, with earned income no more than half of their support; or
• was a full-time student aged 19 to 23, with earned income no more than half of their support.

Other conditions apply: at least one parent was alive at year end, the child must file, and the child can't file a joint return.

The Rev. Proc. 2025-32 base amount is $1,350 for 2026. The tax falls on net unearned income, above twice that amount.

Is your profit unearned income?

Under capital treatment, gains are investment income, so they count. Gambling winnings aren't pay for work, so they're likely unearned as well, unless you're genuinely in a gambling business. Other-income treatment is the least clear. No guidance addresses event contracts, but it's hard to argue trading profit is earned income for a student.

Kalshi interest is plainly unearned.

Worked example

Jordan is 20, a full-time student claimed by parents in the 32% bracket, with $3,000 of summer wages that don't cover half of support. In 2026 Jordan makes $6,000 of net short-term gains on Polymarket under capital treatment.

The first $2,700 is treated more gently, depending on Jordan's own deduction. The standard deduction also shelters some. The exact figure comes from Form 8615. Without the kiddie tax, that $3,300 would likely be taxed at 10% or 12%.

Jordan's parents' rate matters, and Jordan has to get information from them. Parents and students should talk before filing.

Some parents can include a child's income on their own return using Form 8814, but the Topic 553 page limits it to certain income, such as interest and dividends. Capital gains from sales don't fit.

Can your parents still claim you?

For a full-time student under 24, the qualifying child rules are what usually apply, and the gross income test for a qualifying relative doesn't apply to them. A support test does: you can't have provided more than half of your own support. Big trading profits you spend on your own support could change this. A trading account you don't spend from doesn't count as support in the same way. It's rarely an issue, but a large win is worth checking. See Publication 501.

Financial aid

Investment income and assets can affect aid. Report accurately on FAFSA and any school forms, using Federal Student Aid guidance. Rules change, and we aren't covering them here.

Under gambling treatment

Gross winnings raise your income on your return, and a dependent student rarely itemizes. So you'd likely get no loss deduction at all. If you win $8,000 and lose $7,500, you might report $8,000. For a student with a small standard deduction, that's a poor result for a $500 profit. See gambling vs capital gains.

Age limits and access

Venues have their own age rules. Check your venue's terms. This article is about tax only.

What students should do

1. Keep your annual result, even if it's small. Taxes still apply, as how much you have to win explains.
2. Tell your parents if you'll have to file. Their return affects yours.
3. Set money aside. A win is not all yours.
4. Check Form 8615 if your unearned income is over $2,700.
5. Answer the digital asset question honestly on your own return.

Run the free OddsFile check: paste a Polymarket or Hyperliquid address and see your 2026 P&L under each treatment, no signup.

FAQ

Do I report Kalshi on my return or my parents' return?

Your own, in general. The income is yours.

Is the kiddie tax only for kids?

No. It can reach full-time students through age 23.

What if I work and support myself?

If your earned income is more than half of your support, the kiddie tax doesn't apply at 18 or from 19 to 23.

Can I use my own low bracket?

Up to the $2,700 figure, generally yes. Above that, the parent's rate can apply.