Prediction Market Taxes in Florida: What Traders Need to Know

The Good News: Florida Has No State Income Tax

Florida is one of nine states with no state income tax. That means prediction market winnings are not subject to Florida state tax — only federal taxation applies. This is a genuine financial advantage compared to residents of states like California (up to 13.3%) or New York (up to 10.9%).

Federal Tax Treatment of Prediction Market Winnings

Prediction market profits are taxable at the federal level. We are not tax advisors — consult a tax professional for your specific situation.

Short-term vs. long-term

How federal tax applies depends on a classification the IRS hasn't settled. Some professionals treat event contracts as gambling income (from 2026 only 90% of gambling losses are deductible), others as ordinary income or capital gains (where holding period matters), and some take the aggressive position that Section 1256 60/40 treatment applies. Pick a treatment with a tax professional and apply it consistently.

How gains are calculated

Gain = (Payout received) – (Amount paid for contracts) – (Fees paid)

Example: You buy 100 Dolphins contracts at $0.45 = $45 cost. Dolphins win, you receive $100. Kalshi (opens in a new tab) fee: $1.50. Taxable gain: $100 – $45 – $1.50 = $53.50.

Losses

Losing trades generate capital losses, which can offset gains. If you have $200 in gains and $80 in losses in a tax year, you're taxed on the net $120.

Do Kalshi and Polymarket Report to the IRS?

Kalshi says it issues 1099s for interest, credits and rewards, crypto transfers and digital assets, but not a 1099-B for event-contract trading profits; it provides a profit-and-loss statement instead. Keep records of all your trades regardless of what forms you receive.

Best practice: Export your full trade history from both platforms at year-end. Both have CSV export functions in account settings. Store these records for at least 3 years.

Crypto Complications (Polymarket)

Florida residents use the Polymarket (opens in a new tab) US app, which trades in US dollars on a CFTC-regulated exchange, so record-keeping works much like Kalshi: keep your trade history and the tax documents the app provides. (Polymarket's international site, which settles in USDC, isn't open to US residents.)

Practical Tax Tips for Florida Traders

1. Track every trade — use a spreadsheet or export from Kalshi monthly
2. Keep Kalshi and Polymarket records separate for clean calculation
3. Include fees — they reduce your taxable gain
4. Don't forget small wins — all net profits are reportable, whatever forms you receive
5. Use a tax professional — if you trade actively (50+ trades/year) or have meaningful gains ($1,000+)
6. Remember Florida's advantage — no state tax means your effective rate is purely federal