Do you owe tax on open Kalshi positions?
A common worry: if a Kalshi position is up but you haven't closed it, do you owe tax on the paper gain? Usually no, but there's an important exception tied to Section 1256.
This guide explains realized versus unrealized for Kalshi. It is educational, not tax advice.
- An unrealized gain is paper profit on a position you still hold.
- For most treatments, the taxable event is realization, selling the contract or having it settle.
- Here's the wrinkle: Section 1256 contracts are marked to market at year-end, meaning open positions are treated as if sold on the last trading day for tax purposes.
- ContractTax works from your realized trade history to compute your net, and surfaces the figures you'd need if a mark-to-market treatment applied to open positions.
Realized versus unrealized
An unrealized gain is paper profit on a position you still hold. A realized gain is locked in when you close the position or it settles. As a general rule, you're taxed on realized gains, not on paper ones.
So simply holding a winning contract usually doesn't trigger tax until you exit or it resolves.
You're generally taxed when you realize
For most treatments, the taxable event is realization, selling the contract or having it settle. That's when the gain or loss becomes a number on your return.
This is why your trade history, the record of closed positions, is what drives your tax figure.
The Section 1256 mark-to-market exception
Here's the wrinkle: Section 1256 contracts are marked to market at year-end, meaning open positions are treated as if sold on the last trading day for tax purposes. If you take the 1256 position and hold contracts across year-end, those unrealized gains can be recognized.
For flippers who close everything before December 31, this rarely matters, but it's the reason the answer isn't a flat no.
Where ContractTax fits
ContractTax works from your realized trade history to compute your net, and surfaces the figures you'd need if a mark-to-market treatment applied to open positions.
It is educational software, not tax advice. How open positions are handled depends on your treatment and your preparer.