Do You Have to File a Tax Return If Prediction Markets Were Your Only Income?

You must file if your gross income reached the threshold for your filing status: $15,750 for a single filer under 65 for 2025, and by our calculation $16,100 for 2026. The catch is that gross income isn't your net profit. The IRS counts gains but not losses, so a trader who netted $1,000 can still cross the line if their winning trades add up to more than the threshold. Self-employment at $400 of net earnings, or advance premium tax credits, can require a return at lower income.

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.

The thresholds

The 2025 figures are from Chart A in the 2025 Form 1040 instructions. The IRS hasn't published its 2026 chart yet. The 2026 figures below are our calculation, applying the same pattern to the amounts in Rev. Proc. 2025-32.

If someone can claim you as a dependent, a different test applies. For a single dependent under 65 in 2025, Chart B requires a return if gross income was more than the larger of $1,350 or earned income (up to $15,300) plus $450. A student with no job and $2,000 of Polymarket gains would cross that line.

What gross income means here

Chart A's note is the important part: "Gross income includes gains, but not losses, reported on Form 8949 or Schedule D." In the same note, business gross income doesn't get reduced by losses either.

That has specific consequences by treatment.

Proceeds themselves aren't gross income. Cashing out $100,000 from a position that cost $99,000 is $1,000 of gain, not $100,000 of income.

Worked example

Sam is single, under 65, with no other income in 2026. Profit on winners is $22,000, losses on losers $21,000. Net: $1,000.

Under capital treatment, Sam files but owes nothing. Under the 90% rule, Sam pays 10% tax on $3,100 even though he made only $1,000. Under either view he crosses the threshold on the literal reading, although his net profit is far below it. If you are close to a threshold and have many offsetting trades, this is why it pays to count winners and losers separately.

Self-employment and other triggers

Chart C in the instructions lists other situations that require a return regardless of gross income. Two matter most here.

• Net earnings from self-employment of at least $400. A casual trader generally has no self-employment income, but a professional gambler reporting on Schedule C can. See self-employment tax and NIIT.
• Advance premium tax credit payments. If advance payments were made for you or a household member on Marketplace coverage, you must file, whatever your income. Trading gains also change the credit you're due.

Certain special taxes, including the alternative minimum tax and some additional taxes, also require filing.

Reasons to file even if you don't have to

• Your capital loss clock runs anyway. Publication 550 says that when you figure a carryover, you must take the current year's allowable deduction into account "whether or not you claimed it and whether or not you filed a return". Skipping a low-income, loss-making year doesn't necessarily preserve the loss, so work through the worksheet. In some cases negative taxable income protects it.
• Refunds. Withholding from a job comes back only if you file, and you generally have 3 years to claim it.
• The assessment clock starts. With no return, the IRS has no time limit to assess. If you're near a threshold, a filed return puts a clock on the question.

Also check your state. State filing thresholds differ and some are much lower. See state taxes.

If you should have filed for 2025 and didn't

The 2025 return was due April 15, 2026, or October 15, 2026 with an extension. If you owe nothing, the failure-to-file penalty generally has nothing to apply to, since it's based on unpaid tax. If you owe, file as soon as you can, because the penalty adds up every month.

How to check where you stand

Separate winners from losers, since a net number alone won't answer the question. Run the free OddsFile check: paste a Polymarket or Hyperliquid address and see your 2026 P&L under each treatment, no signup. For Kalshi or Robinhood, use your account statements. Compare the gains to your threshold, and if you're close, ask a preparer or simply file.

FAQ

I lost money overall. Do I need to file?

If your winning trades alone cross the threshold, the literal rule says yes, even at a net loss. Under capital treatment, filing also records the loss.

I made $500 on Polymarket and have no other income. Must I file?

Probably not, under the single threshold, unless a Chart B or Chart C rule applies. The income is still taxable in principle, but no return is required on that basis, and the standard deduction would cover it. State rules may differ.

Does a 1099 mean I have to file?

A form doesn't create the filing requirement, and the absence of one doesn't remove it. The test is your gross income and the other conditions above.