FIFO, HIFO or Specific ID on Polymarket: Which Cost Basis Method Can You Use?

If you bought the same Polymarket outcome at several prices and sold only part, FIFO is the default unless you specifically identified which shares you sold no later than the sale. HIFO isn't a separate legal method: it's one way of specifically identifying lots, and it only counts if your records were made in time. Choosing after year end to get a better answer isn't allowed. Kalshi's own statement uses FIFO.

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.

When lot method matters

Lot method matters only if you hold shares bought at different prices and dispose of some of them. If you buy once and hold until resolution, your cost is that cost. It also doesn't change the total for a position fully closed in one tax year. It matters when a partial sale lands in one year and the rest closes in another, or when the holding period differs.

The rule for digital assets

Treas. Reg. §1.1012-1(j) covers digital assets for all acquisitions and dispositions on or after January 1, 2025.

IRS FAQ guidance covers the older approach for earlier periods. Rev. Proc. 2024-28 gave transitional relief for allocating unused basis to wallets as of January 1, 2025.

These rules apply to digital assets. Polymarket outcome tokens are recorded on a blockchain, so they fit the definition, although no IRS guidance mentions outcome tokens.

Worked example

You buy 1,000 YES at $0.30 in March and 1,000 YES at $0.60 in August, in the same wallet. In November 2026 you sell 1,000 at $0.70. The rest resolves YES in February 2027, at $1.00.

The total is the same. The difference is timing: $300 of gain moves to the next year. If the remaining lot had lost, the picture would be a loss timing shift instead.

The holding period can matter too. If one lot was held for more than a year, identifying that lot could convert a gain to long-term.

What "identified in time" looks like

For a self-custody wallet there's no broker to instruct, so the record is yours. Practical minimum:

• A dated record or software rule, set before the sale
• Which lots it applies to, by acquisition date, price and quantity
• A way to show the units left that wallet

A standing rule such as "highest cost first" in your books, adopted before the sales, is an easier fit than choosing lot by lot. Writing a spreadsheet in March 2027 for a November 2026 sale doesn't meet the "no later than the sale" requirement. Without timely identification, the default of earliest acquired first applies.

Polymarket's proxy wallet complicates this a little: positions usually live in the proxy wallet, not the wallet you log in with. Match lots in the wallet that actually held them. See multiple wallets.

Kalshi and Robinhood

Kalshi's contracts aren't digital assets, so the digital asset rule doesn't apply there. Kalshi says it uses FIFO to compute its P&L. The rules for stock also default to the earliest lot, but those are written for stock, so they apply here at most by analogy.

There's no rule that says you must use Kalshi's method, but departing from it means your numbers won't match its statement, and you'd need your own fill-level record. Our Kalshi reconciliation guide covers the mismatches this causes.

Robinhood's annual statement lists each trade's closing date, cost, proceeds and fees.

Does it matter under other treatments?

Stablecoin lots

Your USDC or pUSD also has lots, but because each is near $1, the choice rarely matters. Don't let that distract you. See cashing out to your bank.

Common mistakes

• Pooling all shares at an average price. Average cost isn't a listed method for digital assets. It's useful for checking your numbers but it's not the reporting method.
• Mixing wallets. Since 2025, basis stays in each wallet.
• Switching rules mid-sale. You can change identification method, but each sale still needs identification by the time of sale.
• Assuming software chose for you. Check the setting, and what its default is.

Run the free OddsFile check: paste a Polymarket address and see your 2026 P&L under each treatment, no signup. For paid reports, OddsFile supports FIFO, HIFO and specific identification, and the choice of method is yours to document with your preparer. For how those rows land on the form, see Form 8949.

FAQ

Is HIFO legal for Polymarket?

Choosing the highest-cost units is allowed as specific identification, if you identify them no later than the sale. It isn't a default you can pick afterward.

Can I switch from FIFO to specific ID next year?

Yes. The regulation says changing specific identification methods isn't an accounting method change. Each sale still needs timely identification.

Does Polymarket tell me my lots?

Its data shows trades and prices. It doesn't maintain tax lots for you.

What if I have no records for 2024?

Rebuild from on-chain history. A wallet's public history survives. Pre-2025 periods have their own rules, so ask your preparer about the transition.